Humanity

at work
MONDRAGON , a social
innovation ecosystem
case study
First published in the United Kingdom in 2017
by The Young Foundation
18 Victoria Park Square
London
e2 9pf
Acknowledgements Authors

We wish to thank people both at mon dr ag on Dr Charlotte Heales, Dr Mary Hodgson

co-operatives and living around its & Hannah Rich
headquarters in the Basque Country who
collaborated in the research by giving
interviews and helping us understand the data. Illustrations
We are very grateful that people gave their
time to reflect on the research and its meaning. Poster design and illustration Jamie Beard.
We have anonymised personal identifiers and Words, Dr Hannah Green.
disguised some details in order that people
felt able to speak freely. Any similarities are
incidental and any mistakes ours. The authors Report design by
also wish to thank colleagues at The Young
Foundation who helped develop viewpoints and Effusion
support the publishing of this case study.

The Young Foundation

Inequalities are widespread and complex

and affect many areas of peoples lives. The
Young Foundation is a research and action
institute with a track record of confronting
these inequalities. We work across the UK
and internationally to create insight and
innovations which put people at the heart of
social change.

We dont exist only to accumulate capital

we want to leave future generations something
better than what we found.

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Contents

Foreword5

Executive summary 6
Key implications of our research with mon dr ag on 9

1. Introduction 10
About this case study 12
About mon dr ag on , our case study context 13
Inter-co-operation and intra-co-operation 14
Case study: how inter and intra-co-operation is operationalised at mon dr ag on 15
The national context: the Basque Country 16

2. What is social innovation? 18

Social innovation responds to social demands and values 20
Social innovation is context dependent 21
Social innovation is driven by specific social practices 22
mon dr ag on as social innovation 23
Responding to social needs 28
Innovation mission 25
mon dr ag on s social values 26
Auzolan26
Sacrifice, generosity and solidarity 27
Self-responsibility: ownership and commitment 28
Democracy and participation 29
Learning by doing enabling participation in innovation 31
Social values drive the development of the practices that feed innovation 34
What kind of innovation is mon dr ag on ?35
Case study: Solidarity, labour-sovereignty and its relationship to wealth creation 36

3. mo n d r ag o n s social innovation journey 38

Is mon dr ag on still innovative? 40
mon dr ag on s continuing social innovation journey 41
mon dr ag on s different stages of innovation 43

4. mo n d r ag o n as a social innovation ecosystem case study 46

The balance of negotiating context and changing the context 48
Mondragons context changing and contribution 49
A complex model of a social innovation ecosystem 53
Leveraging capital to have broad benefits 56

5. Conclusions and their implications: m o n d r ag o n 58

References62

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Foreword by Baroness Glenys Thornton
CEO The Young Foundation
At The Young Foundation our passion, and what
drives us, is fighting inequality. We do this
through research, work with communities and
scaling up social innovations. Social innovation
was another way of naming what both the Young
Foundation and mon dr ag on have been doing
since the mid 1950s.
It has been a great honour to have produced
Humanity at Work, a reflection on how
mon dr ag on , the worlds largest worker-led
Co-Operative represents a highly successful
social innovation ecosystem. We are very
grateful to mon dr ag on for allowing us to do
this. Michael Young, our founder, would have
been thrilled with this opportunity because he
was a great admirer of mon dr ag on .
During the work we have brought together two
of our key expertise sets: our work in social
innovation and our work in ethnography to
identify the importance of social value and
practices in social innovation, often ignored. These
are things which are every day and look normal
in mon dr ag on but to an international audience
are markedly egalitarian: the relevance of values
in strategic decisions, the principles of democracy
and internal solidarity, the mechanisms
and instruments of inter co-operation, the
participation in innovative processes.
This case study shows that is possible to
endogenously build more balanced, fair, inclusive
and sustainable development models.
Working with mon dr ag on has been inspiring,
exciting and has filled us with hope that this model
can play a key role in building a better world and
fighting inequality. Its time to seize this moment
and look to building on this roadmap for social
change across the UK and beyond.
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 Executive
summary

| 6
In a shifting global economic context, how are we going
to guarantee high quality employment and competitive
business that works with communities to create social
value and positive outcomes for all?
That is a question that the growing field of social
innovation new, socially driven solutions for
old problems is attempting to learn about and
put into practice.
mon dr ag on offers us a case study which
we believe helps us better conceptualise the
potential for social innovators to come together
in ecosystems and to consider how to create
inclusive yet successful economic strategies.
In what follows we share our key findings
and considerations from the research.
What is mon dr ag on ?
mon dr ag on is one of the worlds
largest industrial co-operative association.
The organisation was founded in 1956
to provide work and employment to
local people at a time of great societal
economic need. It has seen significant
growth: composed of more than 260
different companies and subsidiaries,
with over 75,000 workers in 35 countries,
and annual revenues of over 12 billion,
this constellation of worker-led ventures
describes itself as humanity at work.
Driving forward social impact
through shared values
Social values are an intrinsic part of the
mon dr ag on ecosystem. It was set up to
take an educational and humanistic, while
venture-led, approach to social transformation.
This approach may have enabled its growth
and, leveraged through the full resources of the
co-operative and shared ownership principles,
is also likely to regulate and maintain it.
Organisations working together
to achieve social impact
Rather than being conceived as a singular
co-operative group, mon dr ag on is
best understood as a series of diverse
organisations sharing common values1
and working together to achieve success
and social impact. Social values inform and
regulate everyday behaviour and core working
practices. They inform strategy and maintain
consistency.
Social in means and ends
Social innovation focuses on those
innovative practices to create change that
are social in both means and ends, which
is true of m o n d r ag o n . m o n d r ag o n s
shared values translate into working
practices. They are operational: as a body of
organisations, it has significant democratic
systems and voting parity privileges for
members, such as one member, one vote. Shared
ownership is another operational aspect of its
values.
This ongoing commitment to social benefits and
an egalitarian co-operative working model its
operationalisation of values - have addressed
societal need in ways that are not just social
in their ends but also in their means, making it
socially innovative.
Seeing m o n d r ag o n as a social
innovation ecosystem
What makes m o n d r ag o n a social
innovation ecosystem, not just a social
innovation, is its system of intra- and
1 It is important to note that this research explores the
values of m o n d r ag o n as experienced, expressed
and practiced by research participants. These are
distinct from, but overlap with, m o n d r ag o n s
official corporate values (co-operation, participation,
social responsibility and innovation).
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 inter- co-operation between each of these
co-operatives and organisations, and non-
competition between co-operatives in its
family. This means they dont only co-exist
but also collaborate together. Co-operating
for common good to achieve broader benefits
appears to be a key part of the model.
Success and competition is considered
the key way to leverage social impact
A socially driven system of co-operation tied
to good and often disruptive business ideas
have combined to create a successful group of
businesses which importantly look to build
shared social benefits through their economic
performance. Economic performance and
wealth distribution is a key aspect of the model
and the way it achieves its social aims. This
performance, aligned with and leveraged by the
profit sharing model of the co-operatives, means
that there is potentially greater sustainability
and competitiveness as profits are redistributed
and member mobilisation to work is high.
How do we think this means that
m o n d r ag o n is different?
mon dr ag on is particularly remarkable
because often social innovation ecosystems
are seen to rely heavily on external factors.
However, as well go on to explore in this
case study mon dr ag on has a history of
internal development of complementary
institutions or social innovations which
co-operate to enable the wider mission.
It is a clear example of a social innovation
ecosystem which has not only grown
endogenously but is also self-sustaining,
having developed a range of institutions to
support the existing co-operatives. This
case study suggests that, through the
principles of labour sovereignty (which is
m o n d r ag o n s credo), m o n d r ag o n has
created its own complementary enabling
institutions, where they were needed to
further its development, such as banks to
provide capital or educational institutions
to provide talent for its work.
People are our greatest asset
As the principle of labour sovereignty suggests,
the ecosystem has been mobilised by ideas
about solidarity between people, shared
values and a collective drive to improve life
chances and equality.
The growth mon dr ag on has created and the
success it has had is based on the principle of
labour sovereignty over capital. People are its
greatest asset and its most important aspect.
This means it has facilitated broad participation
and dedicated resources to training and
education to enable that participation.
People feel a strong sense of shared
responsibility to create social sustainability
by generating well-distributed wealth with
broad social benefits. Their commitment
and drive is key to understanding
m o n d r ag o n .

Social innovation is rarely formalised but it is always

socially driven and often values-based. However, it is
rare to see such an example of a comprehensive socially
driven ecosystem where the belief in people as societys
greatest asset has enabled socially sustainable tools for
people to live more egalitarian lives.

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Key implications of our research with m o n d r ag o n
We believe the mon dr ag on example does
not just offer us a different way of creating
socioeconomic transformation, but helps us
understand how broader attempts to distribute
wealth or create socioeconomic benefits might
function sustainably and successfully.
This insight has the potential to move us beyond
a focus on policy makers and external players in
ecosystems and refocus on people and values:
how innovations can themselves encourage
participation and use capacities based on
values such as inter-co-operation, labour
sovereignty and solidarity in order to build
a system of change that enables the whole.
We hope this case study will change the nature
of conversations about how inclusive economies,
those which encourage participation and broad
egalitarian benefit, do not have to sacrifice
success to be impactful. Below we make five key
recommendations based on our learning from
this extraordinary case study.
Businesses can place social benefit as
a core element of their proposition
without compromising their success and
competitiveness in the market. In fact, social
benefit is intrinsic to competitiveness.
Rather than just relying on the solo
entrepreneur, people can be brought together
to create sustainable positive change at scale
if strong and shared values about common
good are embedded in socioeconomic and
investment practice.
People and communities experiencing
socioeconomic inequalities are likely to find
their most effective transformative solutions
by working together to co-create new ideas
which focus on distributing wealth more fairly.
Strong shared values can be powerful
mobilisers of fair action, especially when
embedded in more equal socioeconomic and
organisational practices.
Wealthneeds to be distributed by taxation
but more equal pay ratios also lead to wealth
redistribution. m o n d r ag o n therefore
presents an alternative approach
to fighting the structural causes of
inequality.
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 chapter 1

Introduction

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mon dr ag on 2 is the worlds largest network of
worker-owned co-operatives and is arguably
the most iconic and successful example of
co-operative enterprise anywhere in the
world.3 It has also been described as one of the
most important sociological phenomena of the
20th century.4 Remarkably mon dr ag on was
founded in 1956 by a parish priest, in a context
of severe need in the Basque town of Mondragn,
to create employment for local people.
As we will go on to see, it is this founding which
makes it a social innovation. Today, it has grown
into a constellation of worker-owned ventures,
with more than 260 different companies and
subsidiaries, 75,000 workers in 35 countries
and annual revenues of over 12 billion. It is a
heterogeneous and complex business group with
co-operatives operating at varying scales within
a range of different sectors. It has a continuing
commitment to its founding aims, which continue
to be socially innovative.
Prior to our work, mon dr ag on has been studied
as a uniquely successful industrial co-operative
group with a recognised commitment to internal
democracy and local territorial development.
Previous research on the corporation, from a range
of disciplines, has taken a comparative perspective,
identifying similarities and differences with
respect to traditional business models.
m o n d r ag o n as a social innovation
ecosystem
In this case study we look at the mon dr ag on
case in a new way: as a social innovation
ecosystem. Despite its history of highly effective
social impact, mon dr ag on has seldom
been considered from the perspective of social
innovation.
2 In line with company policy, we use m o n d r ag o n
in capital letters to refer to the corporation throughout
this report. This differentiates it from Mondragn, the
town from which it takes its name and where many
of the co-operatives are still based.
3 Morgan, K. (2016). Collective entrepreneurship: the
Basque model of innovation. European Planning Studies.
24 (8), p. 1544.
4 Ibid.
Social innovation is a relatively new
field and is often a term that innovators
themselves do not recognise or connect
with. Those who are developing new ways of
tackling complex social problems are often
preoccupied with the task at hand and less
interested in labelling what they do.
Social innovation refers to the process,
relationships and products engendered
in creating unique solutions to
entrenched or emerging social need
or problems.
In this case study, we go further than establishing
the grounds for it to be considered a social
innovation: we attempt to review it as a social
innovation ecosystem. An ecosystem is an
ecological term which describes a complex
network of interdependent organisms that
enable, maintain, and can strengthen one another
through their interaction. It best describes the
ways organisms interact with each other and with
their environment.
There is growing interest in social innovation
ecosystems because of the potential they offer.
Understanding a social innovation ecosystem
involves looking at social innovations acting
together or working at scale. We hope that
applying this lens will help people understand
more about how mon dr ag on is so effective,
as well as how social innovation ecosystems
might be understood.
We do this because mon dr ag on has not only
consistently applied its models to new contexts in
innovative ways. It has also adapted those models
over the years in innovative ways in order to
build a kind of sustainable constellation based
approach which we believe makes it possible to
see it as an ecosystem.
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 About this case study
This case study contributes to the growing
body of research around social innovations,
and in particular, social innovation
ecosystems. This is a new lens with which to
study mon dr ag on and we think provides
a contribution to social innovation research.
The case study is informed by a piece of research
carried out in the Basque Country primarily
with mon dr ag on members by The Young
Foundation during 2016 and early 2017. This
created primary research evidence, in the form
of ethnographically-focused research and
interviews 5 carried out with mon dr ag on s
co-operative members, workers, students and
people close to it, which attempts to understand
their viewpoints and perspectives.6 We also
held deliberation sessions with people working
in different co-operatives to explain and tease
out detail, or help validate or explore findings
and ideas. In addition, much of the information
in this case study that provides factual detail
about the co-operatives has been explained by
co-operative members, workers and others,
to us 7. It is also complemented by secondary
socioeconomic data.
To this evidence, we have applied a new lens
to mon dr ag on , that of social innovation.
Here we have been able to draw both on The
Young Foundations long history of expertise
in the field of social innovation as well as
our ethnographic work in understanding
communities, social dynamics and values in
order to bring fresh insight and perspective,
allowing us to understand how mon dr ag on
functions as a social innovation ecosystem.
We are excited by the possibilities this gives
us to develop our own thinking about broader
social change and thank mon dr ag on for
5 The bulk of the interviews were carried out by
Spanish-speaking researchers and transcripts were
subsequently translated into English, while workshops
were bilingual.
6 Ethnographic work focuses on the viewpoints, beliefs
and social contexts of actors in a process, as well as
research observations about their actions. As a result,
we emphasised throughout the interview process
that we were interested in hearing peoples stories,
anecdotes and experiences of m o n d r ag o n , not just
their factual understanding of it.
7 Where this information is not referenced or in quotes
it should also be considered primary evidence.
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the opportunity to learn from its protagonists.
However, we are keen to note that because the
research is a case study, it is not exhaustive.
Nor it is representative of the viewpoints or
experience of mon dr ag on co-operatives
or members. It represents the viewpoints of
The Young Foundation and attempts to help
people start to shape an idea of mon dr ag on
as an endogenously created social innovation
ecosystem of great scale. We hope that it will also
help readers draw conclusions and implications
about how collectives or ecosystems might
mobilise around values such as solidarity or
common values, or how collective tools, such
as those of social movements, or co-operatives
shared ownership models, for example, might be
applied to create greater equality.
Its themes would certainly merit further and
deeper exploration, both globally and in different
co-operatives and organisations which represent
part of the mon dr ag on constellation. We also
believe that mon dr ag on could be looked at as
a social movement and would ideally broaden this
research into different co-operatives and areas.
We also intend to further deepen and publish this
research using our full data set at a further point.
In particular, it is key to note that although
mon dr ag on is an international corporation,
this case study presently focuses only on the
input and experiences of people living in the
Basque Country. We have also been restricted
in our reference to other co-operative models
or broader societal or cultural models of co-
operation. However, by taking a case study
approach in this report, we hope that
m o n d r ag o n is viewed in terms of what it
offers, rather than how it may compare to
other models or places. We look at how it is
a successful model we could learn from, not
the extent to which it is or where its faults
may lie.
This case study purposefully structures
itself along the key questions and critiques
people working in social innovation have
about the world around them. We go onto
explore key questions in social innovation to
the m o n d r ag o n case including whether it
is a social innovation and what kind it is, if,
given its long-running history, it continues
to be socially innovative, and whether it can
be considered as an ecosystem.
About m o n d r ag o n , our case study context
mon dr ag o n is a multinational network of
worker-owned co-operative enterprises founded
in the Basque Country in 1956 on the principle of
labour sovereignty.
Today it is the largest industrial workers
co-operative group in the world, the largest
business group in the Basque Country, and the
tenth largest in Spain.8 Its headquarters and a
significant part of its operations remain in the
Basque Country.
m o n d r ag o n is a distinct case
of co-operativism
mon dr ag on is not a typical co-operative
and has a distinctive operating model. It is a
co-operative complex which includes a suite
of individual and sovereign co-operatives
which make different products and serve
different functions.
8 m o n d r ag o n About Us (English): www.mondragon-
corporation.com/eng/about-us/presence-worldwide/
mon dr ag on employs over 74,000 people
worldwide and has achieved annual revenues
of over 12 billion (in 2015).9
It includes 261 companies made up of 101
co-operatives, 128 subsidiaries and 32 other
entities spanning five continents. Each of these
organisations have autonomy and independence
within the strategic framework agreed by the
overarching mon dr ag on Congress, which
is made up of 650 members from across the
co-operatives.10 Each has the capacity to make
their own decisions internally. mon dr ag on
is worker-led and owned, with 81% of all of its
employees being members,11 and it also employs
non-members.
The majority of the employment provided by
mon dr ag on is concentrated in the Basque
Country, where 44% of their workers are based
(with 40% in other regions of Spain and 16% in
international subsidiaries). Figures show that
mon dr ag on is the fourth largest employer in
Spain as a whole, employing 62,800 people there
in 2013/14.12
9 m o n d r ag o n (2016). About Us Economic and
Financial Indicators (English): www.mondragon-
corporation.com/eng/about-us/economic-and-
financial-indicators/highlights/
10 m o n d r ag o n (2016). Humanity at Work. Available
at: www.mondragon-corporation.com/wp-content/
uploads/m o n d r ag o n -i n g .pdf
11 This was the case in 2015. m o n d r ag o n (2016). About
us Economic and Financial Indicators (English).
12 TUlankide (2014) RSC.
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 Inter-co-operation and intra-co-operation

Organisationally, mon dr ag on is divided into mon dr ag on is also crucially an example of

four areas: finance, industry, distribution and
knowledge.13
The individual businesses within the group
operate in a diverse range of sectors and
industries, from the production and distribution
of consumer goods, to the manufacture of
industrial components; construction as well
as beyond the industrial sector, into retail,
research activities, financial services, and
education and healthcare services.14
All mon dr ag on s business operations are
underpinned by its official corporate values:
co-operation
participation
social responsibility
innovation15
inter-co-operation. Importantly, co-operatives
take a non-competitive approach internally
and provide services to other co-operatives
in the group as well as externally. This
creates complementarity and diversity and,
as we go on to discuss, this means that it is
not just a set of businesses united under the
mon dr ag on umbrella but instead a system
of interdependent and mutually-enabling
institutions.
mon dr ag on is also concerned with external
co-operation or social benefit. mon dr ag on
has a distinct commitment to its environment.
Its headquarters are based in the Basque
Country. The corporations commitment and
contribution to the Basque Country has been
described as the most powerful constituent
of the Mondragon intentional economy.16

Intra-co-operation is a significant feature of Co-operatives within mon dr ag on have a

mon dr ag on s group. Intra-co-operation
refers to co-operation and solidarity among the
individual members of a given co-operative.
One key example of this is described in the list
of core mon dr ag on principles as payment
solidarity. This means fair pay for all work.
However it is worth noting that although we
refer to pay here for clarity, mon dr ag on
does not consider this a salary but rather as a
payment made to members in return for their
services as an advance on the co-operative
profits in the following month what is referred
to in Spanish as an anticipo.
policy to aim to contribute to their respective
local areas in three key ways:
Through the provision of employment
and sustained economic development;
By investing in knowledge and education
in order to help develop skills;
By holding to principles of working that
encourage egalitarianism and improvements
in quality of life.

Its clear that in the whole of Spain, the area with the lowest
unemployment is this one. And the area where wealth is most
evenly distributed is this one. That is, there arent very rich people
or very poor people here. There is a middle class.
Ana, 45, co-operative member

13 Ibid. 16 Gibson-Graham, J. K. (2003), Enabling Ethical

14 Ibid. Economies: Cooperativism and Class. Critical Sociology.
15 Ibid. 29 (2), p.139.

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Case study: how inter and intra-co-operation
is operationalised at mon dr ag on
Solidarity within m o n d r ag o n is
expressed within co-operatives (intra-
co-operation), among co-operatives
(inter-co-operation) and externally
(social transformation). All these concepts
are manifested differently in different co-
operatives and different economic situations
but these relationships are key to sustaining
mon dr ag on as an ecosystem.
Intra-co-operation refers to co-operation
and solidarity among the individual
members of a given co-operative, for
example, as described, payment solidarity.
Another aspect of intra-co-operation
is the significant commitment made by
mon dr ag on to an equitable salary ratio
among the employees. Although this has
become more flexible in recent years in order
to retain and attract talented individuals, the
pay scale tries to balance internal equality
with external competitiveness. This
social dimension of solidarity emphasises
the wellbeing of the individual workers
within the ecosystem, helping to ensure the
wellbeing of the wider ecosystem itself.
Inter-co-operation is the expression of
solidarity between co-operatives of the
group and is often demonstrated in times of
economic difficulty. For example, all member
co-operatives contribute to a collective
solidarity fund (see below), which is used
to compensate losses experienced by other
members. When difficulties arise, relocation
within mon dr ag on is also a key way
in which inter-co-operative solidarity is
expressed. In the case of a recent company
closure, for example, 1200 workers
were relocated in less than 24 months,
successfully avoiding any redundancies.
Similarly, in cases of redundancy the
co-operatives make successful efforts to
relocate staff to other co-operatives
and organisations in the organisation.
Inter-co-operation is also systematically
demonstrated through the joint reinvestment
of profits into employment creation and the
corporation-wide funds for education and
local/regional socioeconomic development.
mon dr ag on operates numerous
solidarity funds, financial expressions
of inter-co-operative solidarity and the
commitment to the future economic
sustainability and development of the co-
operative group and its components. The
most recent Congress of the Corporation,
held in summer 2016, proposed a plan to
design a new model for these funds, as part
of the ongoing learning and adaptation of
the co-operatives and their contribution to
the local area. A Cohesion and Development
Fund (f cd ) and a Corporate Expansion Fund
(fe c ) were both announced. The objectives
of these funds include: to strengthen the
competitiveness of the co-operatives and
their business projects, to facilitate expansion
and growth in the global market, to regulate/
lessen the impact of economic cycles and
facilitate more equal payment across co-
operatives and to encourage solidarity with
society and future generations through, for
example. This financial solidarity across
the co-operative group arguably helps to
maintain the health of the overall ecosystem.
For mon dr ag on , external solidarity is not
primarily considered in terms of collaboration
or co-operation with businesses outside the
group, but with the goals of job creation and
social transformation. The corporation offers
financial support for community initiatives
and reinvests a proportion of its profits in to
local funds. Thus through its commitment to
solidarity mon dr ag on aims to create the
environment it needs, both internally and
externally, to flourish.
15 |
 The national context: the Basque Country

mon dr ag on has a complex socioeconomic
relationship with its surrounding environment,
expressed through co-operativism and
economic as well as social benefit. The
Basque Country has undergone significant
socioeconomic development in the past 50
years whilst retaining its industrial character.
Research participants commonly stated that
mon dr ag on has been a key institution
supporting this change. The Basque Country
is the name most commonly used to refer to
the area and the people located on the shores
of the Bay of Biscay and on the two sides of
the Western Pyrenees that separate Spain and
France. At present, most of the Basque people live
in the Autonomous Community of the Basque
Country.It is an autonomous region of Spain and
has the official status ofnationalityunder the
Spanish Constitution of 1978. The Basque Country
is bordered by the Cantabrian Sea in the North
and has three distinct areas which are defined by
two parallel ranges of Basque mountains.
There are just over two million inhabitants of
the Autonomous Community of the Basque
Country, almost half of whom live in the Greater
Bilbao metropolitan area. Around 30% of the
population was born outside the Basque Country.
In the twentieth century, there was significant
migration to the region, in particular from
Galicia or Castile and Lon. In recent years,
however, immigration to the Basque Country has
primarily been from South America.
A majority of the Basque population identify as
Roman Catholic, although it is one of the most
secular regions of Spain.17
The Basque Country has two co-official
languages: Spanish and Basque. The
sociolinguistic status of the Basque language
has been seen to decline over time, particularly
in the twentieth century because of national
policies implemented by different Spanish
political regimes and the lack of Basque language
schooling. Since the implementation of the Statute
of Autonomy of the Basque Country in 1982,
however, this trend has been gradually reversed
thanks to the introduction of ikastolak, Basque
medium schools.18
In 2006, a survey of all Basque provinces showed
that 30.1% of people over the age of sixteen were
fluent in Basque, 18.3% were passive speakers
and 51.5% did not speak the language at all. The
province of Gipuzkoa, where Mondragn is
situated, had the highest percentage of fluent
Basque speakers, at 49.1%.19
Founded in the Basque Country, mon dr ag on
has strong sociocultural roots in the region. The
organisation takes its name from the local town
of Mondragn in the Gipuzkoa province where it
was established and where the mon dr ag on
headquarters are still located to this day.
mon dr ag on has been said to have made
a distinctive contribution to its environment,
both in evidencing its impact and in broader
perceptions. The epicentre of these benefits is
often perceived to be the town of Mondragn.
The idea of innovation stemming from a critical
moment of economic necessity, with social aims
and ends that benefits more members of society
than one individual or small group, is at the heart of
the mon dr ag on story, as is the extent to which
members feel it makes a continuing commitment
to the Basque Country and local society.

17 Nafra, I (2015) Interactivo: Creencias y
prcticas religiosas en Espaa. La Vanguardia.
Available at: www.lavanguardia.com/
vangdata/20150402/54429637154/interactivo-
creencias-y-practicas-religiosas-en-espana.html
18 Cenoz, J. (2009). Towards Multilingual Education: Basque
Educational Research from an International Perspective.
Bilingual education and bilingualism, vol. 72.
19 IV. Inkesta Soziolinguistikoa Gobierno Vasco, Servicio
Central de Publicaciones del Gobierno Vasco 2008.

| 16
It has been very important for the Basque Country and the
development of this whole area, as it has created jobs and
been able to sustain them. mon d rag on began with the
imagination of converting a deprived area, transforming it
into an innovative place with opportunities for its inhabitants,
which has resulted in an increase in their quality of life.
David, 54, co-operative member

17 |
 chapter 2

What is social
innovation?

| 18
In what follows we begin to consider what social
innovations are and if mon dr ag on can be
considered socially innovative.
A social innovation is usually considered a new
approach to tackling intractable or entrenched,
or emergent, social issues. People will often
attempt to take a social innovation approach
when they want to tackle problems that may
have proved resistant to conventional solutions.
There are three important dimensions to
social innovation:
A social innovation is an articulation of
expressed or latent social demands and
social values
Whether or not something is a social
innovation is dependent upon the context
in which it has developed
A social innovation is frequently driven by
specific social practices that emerge from
those social values (e.g. collaboration and
co-operation, or democratic participation)
19 |
 Social innovation responds
to social demands and values

Social innovations often emerge as expressions

of the social values of the innovators involved, Social demand and
and as a result of social demands20 expressed
by a wider community. social innovation

That is to say that a particular set of values The social demand approach
shared by communities can create a demand understands social innovation
for change when there is tension between those as ideas that respond to
values and lived experience. expressed or latent needs within
society that are traditionally
As such social demand is an expressed or latent not addressed by the market
imperative to make change in response to a failure or existing institutions and
of the market or existing institutions. These are frequently drawn out of
demands are frequently drawn out of inequalities, inequalities, vulnerability or
vulnerability or uneven power dynamics. uneven power dynamics.

Social values and demands come to change

behaviours, or social practices, and govern the
ways in which people choose to take action.
This understanding of how innovation manifests
helps us to define social innovation as:

These changing practices

Social values and social
needs come together in
order to create demand
for new solutions
These values and demands
find articulation in new
are translated into action,
socially innovative models
developing new ways of
and solutions which address
behaving and new practices
the social demands

As such we define social innovation as:

new approaches to addressing social needs. They are

social in their means and intheir ends. They engage and
mobilise thebeneficiaries and help to transform social
relations by improving beneficiaries access topower
and resources. 21

20 Hubert, A. (2010). Empowering people, driving change:

Social innovation in the European Union.Bureau of
European Policy Advisors (b e pa ). Available online: http://ec.
europa. eu/bepa/pdf/publications_pdf/social_innovation. pdf.
21 t e p si e (2014), Social Innovation Theory and
Research: A Summary of the Findings from t e p si e .
A deliverable of the project: The theoretical, empirical
and policy foundations for building social innovation
in Europe (t e p si e ), European Commission
7th Framework Programme, Brussels: European
Commission, d g Research.

| 20
Social innovation is context dependent

Importantly, social innovation is not just about

a new idea but importantly concerned with
making that idea fit its context in a way which
creates socially positive outcomes. Social
innovation is not only context dependent but
context specific.

Social innovation emerges from its social,

political and economic context and must work
with its context in order to build an appropriate
and sustainable solution that again benefits the
context of society and need around it.22

It requires:

The development The translation of that The effective implementation

of an idea idea into an action of that action

22 Hochgerner, J. (2011). The analysis of social innovations

as social practice.Bridges,30.

21 |
 Social innovation is driven by specific social practices

Whilst social innovation must often adapt

to context in order to survive, equally, social
innovations and innovators can exert pressure
on contexts to create change.
In this sense the process of innovation is often
a negotiation between the new and the old:
social innovations have to assert themselves
against other social practices So they assert
themselves in competition with other existing
approaches and are also modified in the course
of this process of assertion. 23
In this way social practices lie at the root of
social innovation because new approaches
cannot arise without adaptation of the ways
in which people behave and interact.
Here, models that might exist elsewhere take
on new characteristics when they are trialled
in new arenas.
More than an idea
Social innovation through the eyes of
Izaskun, 22, a student at Mondragon
Team Academy.
A lot of the time we confuse creativity with
innovation. There are lots of projects which are
creative but ultimately, innovation is something
different, something good and which contributes
some sort of value which hasnt been done before.
I mean, its able to be integrated into the market,
it has to be sustainable as well. That people
demand it and you can offer them it and do
business with it. Not business in the sense
of exploiting or taking advantage, but that
its something you can scale up and improve,
which is in balance with the rest of society.
Thats innovation.

New models therefore frequently need

complementary forms of innovation to sustain
or progress them: new business models; new
capacities; new management processes; new
ways to make the innovation fit existing
social values or current social needs. For
example, as we will go on to see, the Lagun Aro,
mon dr ag on s social security system, was
established in 1959 as a form of social security
for co-operative members, who were classed
as self-employed by the local government
and therefore not eligible for state welfare.
It provides social assurance, health care and
pension cover to co-operative members. Lagun
Aro is a co-operative and has the same functions
and democratic processes as other co-operatives
in the group.

23 (Translation found in: Hochgerner, J. (2011).

The analysis of social innovations as social
practice.Bridges,30.) Franz, Hans-Werner. 2010.
Qualitts-Management als soziale Innovation.
In Soziale Innovation. Auf dem Weg zu einem
postindustriellen Innovationsparadigma, Jrgen
Howaldt and Heike Jacobsen (eds.), 335354.
Wiesbaden: VS Verlag. p.338.

| 22
m o n d r ag o n as social innovation

So how does this apply to mon dr ag on ?

Social innovation is a useful lens for considering
mon dr ag on across its history because of
the way that it has consistently developed new
models in order to balance social demands,
organisational values and the core business aims
of the organisation.

It is also a response to social needs and is driven

by social values, key areas of social innovation.
One particularly important reason for
exploring working practices and understanding
key narrative concepts in our treatment of
mon dr ag on relates to an area of social
innovation rarely explored: its social aims,
impacts, values and the new relationships it can
create. Social innovation seeks to effect positive
change at a human and social level or to bring
about shared consensus. It also seeks to change
access to power and resources.

As we will go onto see, mon dr ag on represents

a good example of people working together in
egalitarian relationships and with a common
consensus. In interviews, mon dr ag on
members emphasised the importance of being
part of a wider whole; that mon dr ag on is not
just a business, it is an experience.

23 |
 Responding to social needs

mon dr ag on began as an innovative response In the post-war circumstances of the 1950s,

to an intense and difficult socioeconomic
situation. It is viewed to have begun as an
endogenous response to the harsh conditions
of poverty and unemployment facing the Basque
Country after the Spanish Civil War.
Poor socioeconomic circumstances were widely
faced in the region and the lack of a sufficient or
widespread response by other agencies, coupled
with strong shared values, appears to have been
integral to its founding and therefore could be
considered a catalyst for innovative practice24,
as this report will go on to explore.
mon dr ag on was a proactive response
to the social and economic needs of the
local community:
It began from asking, what are the needs that
exist in this community and thinking about
how the community could respond to these
needs through the co-operative? All this phase, the
whole way of doing and thinking and understanding the
company and the role of the co-operative enterprise in
the territory in which is located for me that is the
full social experience and social innovation.
Garbie, 36

In the 1950s, at the time of mon dr ag on s
establishment, the Basque Country was nearing
bankruptcy.25 Socially and economically, the
region had been highly prosperous at the turn
of the twentieth century but the impacts of
the Spanish Civil War had created difficult
socioeconomic circumstances for all. Poverty and
unemployment were endemic until the 1950s26
and many basic goods such as wheat, cooking oil, and
coal were rationed. Indigence and tuberculosis were
serious problems 27 which the public and private
sectors were unable to resolve.28 In the post-
civil war period, there was well-documented
social29, political30 and economic uncertainty.31
Father Jos Mara Arizmendiarrieta, a Catholic
priest, was a leading figure in the founding and
development of mon dr ag on . He was keenly
interested in sociology and had planned to study
it at university in the early 1940s, but his bishop
sent him to the town of Mondragn instead.32
Faced with the socioeconomic circumstances
of the local population, described to us by
interviewees as widespread hunger and need,
and the lack of support from other agencies in
addressing these issues, Arizmendiarrieta set
out to address the immediate local need in
the community: 33

24 Campbell, A., C. Keen, G. Norman and R. Oakeshott 32 Foote Whyte, W. & K. King Whyte (1988). Making
(1977). Worker-Owners: The Mondragon Achievement. Anglo- Mondragon: The Growth and Dynamics of the Worker
German Foundation for the Study of Industrial Society. Cooperative Complex. Ithaca, NY: Cornell University
London. Press. p. 248.
25 Porter, M., C. Ketels, and J. Valdaliso. (2013).The Basque 33 Ibid.
Country: Strategy for Economic Development.Harvard
Business School Case 713474. (Revised June 2016.)
26 Lessem R., and Schieffer A. (2016). Integral Economics:
Releasing the Economic Genius of Your Society. Florida:
CRC Press.
27 Clamp, C. The Evolution of Management in the
Mondragon Cooperatives. Southern New Hampshire
University (available from http://community-wealth.
org/sites/clone.community-wealth.org/files/downloads/
paper-clamp.pdf)
28 Molina, F. (2014). Lies of Our Fathers: Memory and
Politics in the Basque Country Under the Franco
Dictatorship, 193638. Journal of Contemporary History.
49 (2), p. 299.
29 Prez-Agote, A. (2006). The Social Roots of Basque
Nationalism. Reno, NV: University of Nevada Press.
30 Totoricaguena, G. (2004). Identity, Culture and Politics in the
Basque Diaspora. Reno, NV: University of Nevada Press.
31 Heywood, P. (2013). Politics and Policy in Democratic Spain:
No Longer Different? London: Routledge.

| 24
Innovation mission
Arizmendiarrietas initial innovative vision was
one of contributing to the local community and
economy through the provision of technical
education and training to young people. As
a result, in 1943, he founded a technical
college with two key value-led principles:
to provide technical education
to local young people
to instil into them a humanistic,
participatory vision based on
values of equity and justice
The technical college, or Escuela Profesional,
initially provided vocational training for twenty
young people, underpinned by the belief that
investment in education would repay itself.
This stemmed from the idea that although there
were few economic resources, the area did have
people willing to work together. Here, people
could use their own labour to participate with
others to create socioeconomic change with
extensive benefits.34 In this vision, vocational
education would become simultaneously
a catalyst for self-realisation and societal
betterment35 .
34 Although it has not been the focus of this study, in
this way m o n d r ag o n has some similarities with
a particular type of heavily institutionalised social
movement or value-based group action.
35 Schieffer, A. and R. Lessem (2014). Integral Development:
Realising the Transformative Potential of Individuals,
Organisations and Societies. London: Routledge, p. 367.
mon dr ag on as a solution was developed
in response to these socioeconomic needs to
create a deeply-rooted organisational culture
today that still appears to value the social
drivers of growth and sustainability which were
part of the founders visions, as well as shared
social and organisational values which help
operationalise working practices. These are
values we have identified through the research.
They are implicit and intrinsic, and key to a
discussion of mon dr ag on . They also appear
to underpin its social innovation mission36:
Auzolan and the common good
Sacrifice, generosity and solidarity
Self-responsibility
Democracy and participation
Learning by doing
In the next section we go on to explain each
value based on qualitative interviews with
mon dr ag on members who helped identify
them. We believe these values and their
operationalisation via practices are key to
understanding the type of social innovation
mon dr ag on engages in, which we go on
to explain.
36 It is important to understand that m o n d r ag o n has
official shared values and principles which are shared
in the introduction and which are different to those we
share here.
25 |
 m o n d r ag o n s
social values
One of our key questions, in applying
an ecosystem case study approach, is to
consider how people who work together
at mo n d r ag o n make it work and why
they support, drive or commit to its social
values which steer its commitments and
innovative practices. Often, these consistent
commitments are made in the context of societal
change or challenge, as we will go on to see. So
how does this ecosystem socially sustain itself
and maintain shared ways of doing things
especially ways considered to be so unusual
when compared with other business models?
Below we identify core narratives which describe
shared social values people have, which emerged
from research as being crucial to underpinning
mon dr ag on s working practices. Shared
values are also central to the operation of social
innovation and co-operativism.37
For a system such as mon dr ag on , the
operation of these values and concepts
regulated or enabled by the co-operative model
could be argued to help define sustainability.
One particularly important reason for
understanding key narrative concepts in a social
innovation case study relates to an area of social
innovation rarely explored: its social aims,
impacts and the new relationships it can create.
Social innovation seeks to effect positive change
at a human and social level or to bring about
shared consensus. It also seeks to change access
to power and resources.
37 Mayo, E. (2016). Values: How to Bring Values to Life in your
Business. Sheffield: Greenleaf Publishing Ltd.
| 26
Auzolan
Auzolan is a concept which was discussed by
people who took part in the interviews as being
key to the development of the mon dr ag on
cooperatives. Auzolan in English means
community work and can be used to explain the
commitment of members and workers to their
co-operative:
Its the idea of a community working together. Working
together as a community to build something for the
community. For example in neighbourhoods where there
were no roads, people came together as a community and
built them.
This is the expression of inter co-operative and
intra co-operative forms of solidarity.
Unai, 41, sees auzolan as fundamental to the story
of mon dr ag on s development. He describes
it as the idea of joining forces to get ahead in a hostile
environment. Importantly, it is seen as the initial
seed which contributed to the growth and
flourishing of the co-operative. Begoa, 36, who
works in local government says that:
even before we had the co-operatives, there was a strong
concept of auzolan. Joining up with your neighbours and
other people and all working together to achieve a goal.
So the tradition of auzolan maybe that characteristic,
or that territorial character and the philosophy which
was present in this area contributed.
Common good also represents the self-
sufficiency of the community and its ability to
achieve things together without other support.
Interestingly, auzolan is a community-led
practice, referring to the ability of the
community not only to work together but to
achieve things. People think that at the time
mon dr ag on was created, the lack of existing
institutional structures meant that citizens had
to take a more active role in improving their own
communities. Community-led social practices
such as auzolan are perceived by people to
be most active when institutional provision
is lacking.
Sacrifice, generosity and solidarity

Sacrifice is a concept used to explain what
is involved or incurred in community work.
Broadly the principle of co-operation has been
elsewhere identified as occurring when an
individual incurs a cost to provide a benefit for
another person or people38 and this appears
to be true of mon dr ag on in terms of how
frequently the term and concept is used and how
it is developed.
Sacrifice expresses what happens through
auzolan. It is the collective giving-up of
something for the greater good. Here it is an
organisational commitment to guaranteeing
long-term survival and sustainability:
Sacrifice is for the future, for something bigger you want
to achieve, for a greater good, then thats it, you have to
do it. You have to do it. Jose, 53
In interviews at mon dr ag on the concept
of sacrifice is used to help explain why people
commit to co-operation and why it appears
to be a crucial part of the way people work
together. Here sacrifice is often expressed
as generosity towards others. Importantly
it is a value which is refers to social
relationships and commitments.
For example, mon dr ag on has a salary ratio
of 1:6. This is said to create a significant culture
of equality within the corporation. People may
interpret managerial workers being in the co-
operative as a form of a sacrifice as they might
attract higher salaries elsewhere due to the 1:6
salary ratio.
Certainly, some of the senior managers we spoke
to are aware that they could earn more outside
of the co-operative but those we spoke to choose
to stay in mon dr ag on because of its values
and the security that membership may offer.
For example, Fernando, 55, is a manager in a
large co-operative who previously worked in the
private sector. Fernando uses the language of
generosity, rather than sacrifice, to describe his
experiences of mon dr ag on :
I think theres also fundamental values of generosity,
in the sense that I do want to earn a good wage but
not in order to become a millionaire. As the director of
commercial enterprise with a certain level of turnover
and staff, I would earn way more for sure. But you carry
being in the co-operative because youre interested in
the sharing out of wealth. I can have a job and at the
same time, create more jobs and more wealth in my
environment.
Importantly there are different types of
sacrifice and generosity at work in the
model. Sacrifice is seen as the rationale for
commitments or contributions towards
others, which is experienced by them as
generosity. This concept also recognises the
generosity they have towards you and that
you both have towards others. Generosity
is expressed from one person to others,
between people, and from a person to the
area or future generations. This is very
similar to and builds on notions of inter- and
intra-co-operation.

Sacrifice for its own sake is not, but sacrifice for the good of
something bigger is. Parents made sacrifices so that their
children would be prepared for the future Sacrifice is for the
future, for something bigger you want to achieve, for a greater
good, then thats it, you have to do it. You have to do it.
Jose, 53

38 Henrich, N & Henrich, J (2007) Why Humans Co-operate:

A Cultural and Evolutionary Explanation. Oxford: Oxford
University Press. p. 37.

27 |
 Self-responsibility: ownership and commitment

Another key concept which emerged in
interviews as a shared value or narrative
concept helps explain how an individual should
approach their work in accordance with the
values of shared work and shared outcomes. This
is self-responsibility, auto-exigencia, which is
understood as personal behaviour in accordance
with collective principles and decisions. While
there are implications for social control (and
open and transparent regulation of each others
work) it relates to the idea that people are
protagonists in their own project: Co-
responsibility is linked to the fact of being co-proprietors
of our own project, practicing solidarity but demanding
rigour. Maria, 45
In the co-operative context self-responsibility
has a deep significance because each individual
is an owner and is responsible for collective
success or outcomes. Taking responsibility for
yourself and each other is even more important
when the business belongs to you. Self-
responsibility stems from the awareness that
I am the co-operative and everyone has to make
an effort, whatever their position, to do their
best for the future:
When youre a worker and a member, it means that
youre the owner. It depends on which co-operative
youre in, but in my experience you contribute much
more Because at the end of the day, its your business
and you have to be responsible for it. Begoa, 36
As a result if you expect others to uphold the
values and standards of your co-operative, you
also simultaneously commit yourself to do the
same. Luis, 57, says that it is about solidarity and
responsibility, its about saying that Ill help you but you
also have to be prepared to help yourself.
This value also relates to times when there are
challenges and increases a feeling of
participation. By recognising the tough
decisions that need to be taken and the collective
sacrifices that have to be made, you also
acknowledge your role in that process. For
example, as a co-operative member you accept
the need for a pay cut (i.e. a financial sacrifice)
for the wider good.

The members had gone several months without taking home a proper wage,
making significant efforts to get the business back off the ground. I was
struck by the level of commitment people had to the project. The business
began to recover and this created a sense of excitement, which in turn
deepened the commitment because there was still that concern for the
situation and the local perspective our families, children, neighbours.
Eneko, 55, speaking about the 1980s.

| 28
Democracy and participation
One of the elements of the co-operative model
which distinguishes it from other business
models is the centrality of partnership, trust and
relationships.39 Democracy and participation
are key elements of the co-operative model as
outlined by mon dr ag on members. Leire, 39,
emphasises the fact that this has always been
the case. She points out that people talk about
workers participation in business as if it was
something new and innovative, but it has been
the essence of m o n d r ag o n since it began.
As a co-operative group today, mon dr ag on s
commitment to democracy is expressed in
both ownership and governance. Equity in the
organisation is owned by workers. This shared
ownership is considered to build a sense of
shared responsibility to look after the long-
term best interests of the organisation. Further
reinforcing this sensibility, each new member
invests approximately 12,000, spread over 24
months, in the enterprise when they join.40
There are also commitments to democracy,
which is a key feature sustaining and enabling
mon dr ag on as a social innovation ecosystem.
For example, at mon dr ag on there is a one
person, one vote principle which applies to
major decisions. Each member has one vote,
regardless of their role, financial contribution
or how long they have been a member.
39 Mayo, E. (2015). The Co-operative Advantage: Innovation,
co-operation and why sharing business ownership is good for
Britain. Co-operatives UK.
40 The exact figure and timescale varies between
individual co-operatives in the group.
The right to vote extends equally to every
worker-member in the corporation. Exact
governance structures are particular to each
individual co-operative but the principle of one
person, one vote is universal. This is much
prized by co-operative members and to them
represents a democratic attitude to decision-
making that enables and mobilises effective
participation.41
The one member, one vote principle of
co-operative democracy is considered by
mon dr ag on members to be so important
because it is an indication of the participatory
equality that the co-operative operationalises
in working practices such as the ability to be
proximate to senior staff. For example Rafael,
37, talks about how the previous director of his
co-operative, met with all new members of staff
once a year:
I was touched deeply that the CEO of a multinational
company would take the time to chat to new people
and see how things were going.
41 Interestingly there are links with Basque local
government in which it has been commented that,
a neighbourhoods elected representative does not simply
wield power, but builds consensus for group projects.
(Morrison (1991), p. 69, drawing on Jackobs (1979).)
29 |
 Case study: Values in practice
Democratic organisation is one of the
ten principles of the mon dr ag on
Corporation.42 The group and the individual
co-operatives within it operate a system of
representative democracy, acknowledging
the impracticality of fully democratic
decision-making in an organisation of 75,000
people.43 Each individual co-operative has a
General Assembly, an annual meeting of all
members in which important decisions about
their co-operative are made collectively.
Decisions about matters such as working
hours are made individually by each co-
operative. In addition, the corporation holds
a Congress which debates and votes on
significant strategic or social issues which
affect the entire corporation such as its
mission and values, election of its President,
overall organisation and policies of the
Corporation. This Congress consists of 650
delegates from the 101 co-operatives in the
group. Each person has one vote.
Another aspect of mon dr ag on s
representative democratic system is that
members propose and elect representatives
to the Consejo Rector (Governing Council)
and Consejo Social (Social Council) of their
respective co-operative. Any member may be
elected, and an elected member is required
to serve.
42 m o n d r ag o n Our Principles, website.
43 This section and subsequent factual explanations of
the m o n d r ag o n co-operative model is based on
direct correspondence with members who explained
the functioning of the model to us.
| 30
The Governing Council is responsible for the
big picture vision of its co-operative its
mission, strategy, policy, financial health and
monthly progress. The Governing Council
is led by a President who is appointed from
among its elected members, whose decision
must also be ratified by the General Assembly.
The role of the Social Council is different; it
does not have the formal decision-making
power of the Governing Council. Its main
function is to communicate the perspectives
of frontline workers to the co-operatives
leadership, and generally facilitate
multidirectional communication between
frontline workers and their governance
and management bodies. It often makes
recommendations to management or the
Governing Council on key issues, advocating
on behalf of frontline workers and addressing
local issues that arise.
In addition to the democratic bodies already
mentioned, each co-operative also has a
Consejo de Direccin (Management Council)
which is responsible for the development and
executive management of the business. This
is led by the gerente (CEO) who is appointed
by the Governing Council.
Learning by doing enabling participation
in innovation

The final principle identified as central to
the values of mon dr ag on , especially over
time, which we look at more fully here than
other values, is the idea of learning-by-doing.
Learning-by-doing enables participation and
essentially reflects the generosity of members
towards their community, by training them and
facilitating their participation. It is a central
value to understanding mon dr ag on s
innovation style.
Learning-by-doing is the idea that learning
and labour participation is possible with access
to practical resources and the appropriate
support and training.44 As described by people
at mon dr ag on it relates to an educational
idea of doing something through practice and
reflection.45
As broadly expressed at mon dr ag on ,
this approach is about having confidence in
people that they can have success using their
labour through trial and innovation. This is
closely connected with labour sovereignty as
the first business principle at mon dr ag on ,
and innovation as one of Arizmendiarrietas
guiding founding concepts. It is very much
in keeping with founding values around
education as empowerment and commitment
to transforming society; and also connects to
innovation principles.
Importantly, the idea that people are able to take
part and learn as they participate fundamentally
speaks to principles of generosity and enabling
broader levels of participation. It also raises
questions of what type of capital resources might
be included in the benefits of mon dr ag on , in
that this mobilisation of talent relates to social
capital, not just economic capital.
The first co-operatives began in conjunction
with the technical school in order to provide
vocational education. Principally they provided a
combination of education and experience, theory
and practice. Innovation was also a key part of the
model as it was seen as essential to growth.
This concept of learning and doing is an ongoing
process for mon dr ag on .46 It was likely key to
the first establishment of different co-operatives,
initially, especially as it enabled membership of
people who might not have had specific skillsets
through which they could contribute their labour.
Initially, learning-by-doing stays at the
individual level: it is about the ability to
experiment and innovate to address societal
challenges. However, it is enabled at the social
level: by other people giving their support to you
learning as an individual.

Id definitely prefer a co-operative. Id prefer to work in a

business which wasnt just one with a lot of capital, but one
which created employment and created impact. Thats more
important than ever nowadays, creating jobs and creating
wealth but not just in a financial sense, but socially as well.
Iratze, 19, student

44 This relates to John Dewey (18591952) and William 46 Morrison (1991).

Heard Kilpatricks (18711965) concepts of learning
by doing.
45 It has its roots in more didactic approaches and has
links with economic theory whereby a protagonist
might implement better solutions through trial
and testing.

31 |
 However, evidence indicates that
experimentation can be socially mobilised,
especially in situations where social confidence
is not well-established or where people are
thought to lack social capital and feel that
they need the social permission to act.47
Interestingly, although learning by doing
does relate to vocational training, one aspect
of learning by doing is the generosity of
relationships between people: the way that you
are taught and supported by others to learn and
develop yourself as a co-operative member,
not just learning to do the job itself. This is
about the shared confidence to innovate and to
trial new ideas together. Risk taking, personal
experience and developing a sense of working
identity is central to peoples understanding
and expression of the co-operative model. In
interviews people speak about the co-operative
as a way of life they learned through being
involved rather than something they came
to fully formed or with the skills for:
I wasnt born a co-operator, I became one.
Asier, 54
The Alecop co-operative began in 1966 in
order to facilitate this combination of learning
and earning which continues today. It is a leader
in the development of educational projects
and market development, illustrating how the
ecosystem approach develops complementary
institutions to sustain mutually reinforcing
practices aligned with keystone values.
47 Hodgson, M. (2017, forthcoming). People Like Us Dont
Do Things like That? A Guide to Community Action. London:
Young Foundation.
| 32
Miren expresses this sense of learning when she
talks about how things have been shaped by the
co-operative: In some ways, I do think its all ingrained
in us now. We dont do it because we have read it
all in books and thought it was good. I think it
just comes naturally to us, to do things this way
because we dont know any other way of doing things.
We have focused on learning by doing in more
depth in this case study because learning by
doing is also about innovation and economic
growth48 by solving a tangible challenge by
providing a product core to mon dr ag on s
industrial heritage. This gives learning by doing
a strong connection with innovation principles,
as innovation is a necessity in order to develop
or find new products, services, processes, and
management techniques to meet existing social
and market needs. Other commentators have
seen this to be at the heart of mon dr ag on s
development, believing it to have supported
endogenous growth because it also relates to
innovative business practices as well as giving
others the skills to do something.49
48 Arrow, K (1962). The Economic Implications of
Learning by Doing. The Review of Economic Studies, 29 (3);
Yang, X. and J. Borland (1991). A Microeconomic
Mechanism for Economic Growth. Journal of Political
Economy. 99 (3).
49 Larraaga Lizarralde, J. (1998). El cooperativismo de
Mondragon: Interioridades de una utopia. Basque Country:
Atzatza, p. 117.
Case study: mon dr ag on Team Academy and social innovation
mon dr ag on Team Academy (MTA) is When students at Mondragons Team
a practical learning programme offered Academy were asked to define social
by Mondragon University in several innovation, their responses and
campuses, in which students learn discussions shared many values and
entrepreneurship through running their ideas about social innovation heard from
own businesses rather than through members working in the cooperatives:
traditional academic learning methods.
Students are referred to as teampreneurs
and there is an emphasis on active
learning and co-operative values. It
is based on a Finnish model but has
connections with learning by doing.
I think that social innovation is
basically that idea of leaving things
better than how you found them.
Ainhoa, 21
Its about not
settling for what youve
got but trying to improve things,
with copying and improving what there
is. Inventing something and doing it together Social innovation is
social conscience and the desire for an impact more than just giving something
where you are, with the people who are there, to to disadvantaged people. Its about
improve the situation. having a social impact and bringing those
Maider, 20 people into the business.
Oscar, 21

[It is an] effort to do things

in a different way, which isnt the typical
way of doing things, trying to do something
in a new way which people havent done before
or dont expect. Doing things differently, contributing
something more creative, thinking outside the box a bit. Moving
away from the established patterns of things to create
something new and original.
Marta, 20

33 |
 Social values drive the development of the
practices that feed innovation
These principles have in turn been used to
develop entirely new models of doing business
in the Basque country. The organisation that
has developed, we argue, holds true to our
definition of social innovation, as summarised
in the table below.
Summary of mo n d r ag o n as a social innovation
a s p e c t o f s o c i a l i n n o va t i o n
Newapproaches to
addressing social needs.
They are social in their
means and intheir ends.
They engage and mobilise
thebeneficiaries and help to
transform social relations by
improving beneficiaries access
topower and resources.
| 34
r el ated mon dr ag on fe at u r es
mon dr ag on isnt the first worker-led co-operative
but it is a model that was entirely new to its own context
when developed. The mon dr ag on model was created
in an environment of deprivation and isolation and so
required adaptations to ways of doing business.
Worker co-operatives as an approach to social needs
have existed for 150 years, but mon dr ag on took
this approach into sectors of the core economy
manufacturing, retail and R&D&I of a particular
region as none had done before.
These adaptations are distinct to the mon dr ag on
example. In particular both the informality in
arrangements between co-operatives in the early days
and extensive, institutionalised inter-co-operation in later
decades, are key features of the mon dr ag on model.
mon dr ag on developed its model not only to serve
a social good but also with an aim to do this in a way
that puts socially positive ways of working, such as
democratic participation, at its heart. It also seeks to
empower people, teams and communities in addition
to creating new ways of working with, or formulas for,
improving social relations
mon dr ag on aimed to build a model of work and
enterprise ownership: all workers are actors and
protagonists of the organisation, and all are involved
in the processes of decision making and development.
Whilst today not all employees are members,
mon dr ag on still aims to ensure that principles
of collaboration and idea sharing are central to ways
of working.
What kind of innovation is m o n d r ag o n ?

Social innovation theorists frequently identify
social innovation as coming in three distinct
forms,50 as is shown below.
We suggest that mon dr ag on is most
effectively understood as a kind of disruptive
innovation. This is because mon dr ag on has
not and does not look to reorganise existing
structures or address specific market failures.
Rather, today mon dr ag on looks to provide
an alternative way of doing business in its
context: it is a model that looks to tackle issues
of social deprivation, unemployment and skills
shortages through the creation of a business
complex driven by a core set of social values
rather than being able to work with existing
mechanisms or access to resources, it creates its
own. For example, mon dr ag on s principles of
participation and democracy are very important
for understanding collective decision making
and shared power. Compared to conventional
business models, there is a disruption to
traditional power structures.51
This is historical. Key to the innovation
inherent in the m o n d r ag o n model
was the disruptive nature by which these
practices were aligned to the relationship
of labour and capital. Mondragon workers
have been and are owners and workers at
the same time. They describe themselves
as protagonists.

i nc r e m e n ta l disruptive structur al

Incremental social Disruptive social innovation Strutural social innovation

innovation operates within
existing frameworks
in order to deliver new
solutions to address social
market failures
provides entirely new models reconfigures markets,
for organising markets structures institutions
and/or social interactions. or organisations in the
Instead of operating within process of innovating
or adapting existing models
it creates entirely new ones
which come to change our
framework of understanding

The values of todays world are increasingly individualistic and selfish.

People are losing the values which have greater relevance to those of
the co-operative. Societys values are increasingly less aligned with the
theoretical values of the co-operative. It would be good if the co-operative
model and what it promotes fitted better with the values of our society.
Iker, 46, co-operative member

50 Nicholls,A., &Murdock,A.(2012).The nature of social 51 Erdal, D. (2012). Employee-owners do it better, TEDx

innovation. InA.Nicholls&A.Murdock(Eds.),Social Glasgow: www.youtube.com/watch?v=yb2h0qPWp2Q
innovation: Blurring boundaries to reconfigure
markets(pp.132).Hampshire:Palgrave MacMillan.

35 |
 Case study: Solidarity, labour-sovereignty and its relationship
to wealth creation
mon dr ag on evidences a distinct
approach to wealth creation which is
based on solidarity between members
and with the local region.
As the diagram below shows,
mon dr ag on s first priority is
functioning as a competitive and
profitable business. However, financial
capital is described as instrumental and
subordinate to its business operations.52
The co-operatives rely on capital as a
tool for creating employment and for
long-term sustainability of the model.
Profit is sought as a means for job
creation and socioeconomic change,
rather than as an end in itself. Capital
is important primarily because it
enables the economic success of the
co-operatives. This in turn means
52 Ibid.
| 36
they are able to transform peoples lives
and sustain the wider social innovation
ecosystem of mon dr ag on in a way
which is more resilient to external factors.
The sovereignty of labour is part of
mon dr ag on s credo; the corporation
lists this as a key principle and states
that labour is the main factor for
transforming nature, society and
human beings themselves.53 Rather
than depending on the wealth of natural
resources available in the area, the co-
operative group utilises the value of local
human capital.
Employment creation and preservation,
at whatever scale, is deeply embedded in
the culture of the co-operatives and can
be seen as an aspect of mon dr ag on s
solidarity with society.
53 Ibid.
However, it has been noted by commentators
that Arizmendiarrieta was good at working with
context to create change. He is said to have been
particularly good at navigating the complexities
of Spanish law in order to find a suitable legal
title for each institution.54
By the mid-1950s, the first co-operative
organisational groups or ventures were
established on the basis that they would employ
the young people who had been trained by the
technical college. Ulgor, the first co-operative,
was set up by Arizmendiarrieta together with
five others Luis Usatorre, Jess Larraaga,
Alfonso Gorroogoitia, Jos Mara Ormaechea
and Javier Ortubay based on a shared vision
of change. Importantly this shared vision of
change was a new way of doing things in a
context and engaging with social need to do
something radically different:
When Arizmendiarrieta arrived in the town, it was a
poor environment in every sense: relationally, socially,
economically... Given this need, he was able to generate
a lot of enthusiasm. The fact that progress was rapid
gave it the strength to continue. There was a specific need,
in a particular environment, with specific people and
the fruit of much hard work and dedication in order to
achieve the objectives. The educational movement of this
valley is not a coincidence. Arantza, 53
If we take the example of Lagun Aro we can see
how the disruptive nature of mon dr ag on
came to require complementary innovation.
In 1958, the Spanish Government passed
legislation that decreed that members of worker
co-operatives were ineligible to receive social
security because their membership meant
that they were considered self-employed by
the state.55 Faced with a challenge to member
welfare Lagun Aro was developed in order to
provide forms of social welfare to members. Caja
Laboral56, a co-operative bank was established
as well as Lagun Aro, to provide financial
resource which could aid growth and underpin
sustainability.
54 Campbell et al. (1977), p. 25
55 m o n d r ag o n (2016) History (English): www.
mondragon-corporation.com/eng/co-operative-
experience/history/. The public social security regime
at the time did not cover those classed as self-
employed, which in the 1950s included co-operative
members.
56 Workers Credit Union, known as Laboral Kutxa in
Basque.
Establishing these different organisations
or servicing functions was considered
strategically key. As we will go on to see, they
underpin mon dr ag on s approach as a social
innovation ecosystem. The need for this support
came about precisely because of the disruptive
nature of the mon dr ag on model and it
is what has informed its journey to a social
innovation ecosystem.
Importantly, in our interviews, people described
the creation of these various complementary
institutions as a way of meeting needs that were
not simply pressing or immediate. Rather, they
spoke to the more ambitious and long-term aims
of sustainable human development, based on the
creation of genuine transformation:
He realised that here there was the embryo
of a great idea, of growth, but if he didnt do
certain things bound to the community, it could
all fail. So he decided that what was needed was a
savings accounts, a bank, although he didnt exactly call
it a bank. If we dont create a bank, everything else will
be undermined at that time, in the post-war society,
people had money in small businesses and farmhouses.
The money was already there to an extent but creating a
bank gave it an image of solvency. Having this image of
solvency made it seem responsible and viable and was
very important for the development of the entire co-op
experience. Caja Laboral still exists and it is still an
important part of the co-operative group. Joseba, 71
Pooling money collectively into a shared
financial service to provide greater solvency,
legitimacy and permission to the community
can also be seen to be a disruptive move which
underpinned the central vision.
Caja Laboral is another important
example which began with the objective
of contributing social, economic and
business services to industrial co-ops. It
had to collect resources from the co-op
members in order to give them to their
own. Further, to organise the coverage of
Social Security, they set up the Provision
Service, the basis of what is now Lagun
Aro. In a period of crisis which began
in 1974, the mutual support of the co-
operatives and the action of Caja Laboral
was key for the development of the group.
37 |
 chapter 3

mon dr ag on s
social innovation
journey

| 38
What sits behind mon dr ag on s social
innovation and ecosystem evolution?

A major question for those interested in social

innovation theory is when something stops
being an innovation or socially innovative. So,
given mon dr ag on is a long-standing co-
operative group, this section explores the extent
to which mon dr ag on can still be considered
a social innovation today.

In what follows we look at the journey

mon dr ag on has taken and the ways in which
mon dr ag on has evolved over the years.
We argue that not only can we still consider
mon dr ag on socially innovative but that it
has also enabled this continuing innovation
through the development of what we believe is
a unique social innovation ecosystem. In the
next chapter we go on to explore the features
of this ecosystem.

39 |
 Is m o n d r ag o n still innovative?

Social innovation theory has continually
grappled with the question of when a social
innovation stops being a social innovation.57
There is no clear answer to this. However there
are a number of factors that contribute towards
whether or not something continues to be an
innovation, including:
his proposed changes to the organisational
structure were voted down by members in the
Assembly, he felt a bit out of place in the co-operative,
to be honest. In this sense mon dr ag on s
decision making exercises consistency with
values. This might encourage some to view
mon dr ag on as no longer innovative.

the amount of time that an innovation However, whilst these dimensions may seem
has been in place problematic, mon dr ag on exists, still, as a
disruptive example in the world of a different
the degree to which it has achieved way of doing business.
market share or scale
Whilst elements of its own practices are
the extent to which it has become entrenched mon dr ag on continues to exist
institutionalised as a model that is decidedly not the norm and
continues to provide another business model to
the extent to which it continues to the world, even as the global economic context
adapt or change. shifts and changes around them.

In respect to the questions above we can see
that mon dr ag on has been around for more
than half a century. It has achieved substantial
market share and scale and it can be considered
to be institutionalised, both internally and
within the context of the Basque country where
it is engaged both with the community and with
institutional actors.
What is more, we might argue that the
incorporation of subsidiaries outside of the
Basque country who are not co-operatives,
and which therefore do not hold on to the same
values of democracy and participation, is a
migration from the innovative model developed
into a more traditional corporate model.
The adaptive capabilities of mon dr ag on
continue to be decidedly innovative. In the
face of issues such as the decline and collapse
of Fagor Electrodomsticos mon dr ag on
looked to leverage the capital of the cooperative
in order to save jobs and, when this failed were
able to redeploy most of the workers in the
organisation. This shows the continued attitude
of innovation which, enabled by the power of
the cooperative model, continues to offer new
models not only for doing business but also for
dealing with crisis.

In addition there is an extent to which some of

the democratic elements of decision making
processes at mon dr ag on create a climate
in which change is difficult. With all members
voting on recommended change or innovation,
change can appear to be slower or blocked. For
example, Aitor describes challenges in making

57 Rnning, Rolf, and Marcus Knutagard.Innovation

in social welfare and human services. Routledge, 2015;
t r a n si t Deliverable 4.4 Theme [ssh.2013.3.21]
[Social Innovation- Empowering People, changing
societies] Project Full Title: Transformative Social
Innovation Theory project Grant Agreement n. 613169.

| 40
m o n d r ag o n s continuing journey of
social innovation and sustainability

It is this need to work with the wider context
that has spurred the development of the social
innovation ecosystem. mon dr ag on , despite
its successes, has not been adopted as a global
model for doing business.
As a result of this it has systematised a set
of processes that looks to guarantee its own
longevity for the greater good. The innovation
ecosystem looks to create an enabling
environment not just for today but also for the
future. We argue that it is precisely this set
of processes that ensure that mon dr ag on
continues to be innovative in the face of barriers.
Over time there has been a progression in the
way that mon dr ag on as an organisation
works. It has developed what can be seen as an
endogenous framework of continual innovation
which speaks to the internal narratives of
mon dr ag on , organisational culture and core
values, as can be seen in the diagram below.
Here, mon dr ag on can be seen to have evolved
from a social enterprise, which disrupted classic
economic models with the aim of tackling
inequality and deprivation, to an organisation
which has needed to innovate internally in order
to maintain itself within a global and national
environment where it continues not to be the
norm. mon dr ag on members discuss how
it has continually adapted to its environment
and innovated internally. There is solid support
for innovation and it is one of four agreed
formal principles or values, as well as one of
Arizmendiarrietas key concepts.
Simultaneously mon dr ag on now exists as
a collection of organisations and bodies which
work together to enable one another, and to
drive continued positive social change. In this
way mon dr ag on has journeyed from a social
innovation to a kind of innovation ecosystem,
as explored further next.

mondr agon builds broa der institutions mondr agon:

co -oper ati v e ba sed
social enterprises
mon dr ag on began as an
enterprise designed to address
the poverty and deprivation of
the Basque Country. Its mission
was to use a co-operative
model in order to provide
jobs and improve livelihoods.
From the development of the
first venture, Talleres Ulgor,
MONDRAGON had to innovate
in order to introduce the co-
operative model to this complex
context.
developed to serve
enterprises for
the common good
The success and growth
of mon dr ag on quickly
demanded adaptation. This
began in the form of enabling
institutions such as the Caja
Laboral, the credit union, and
Lagun Aro, a body providing
social welfare.
In this way innovative
solutions were found in the
process of adapting existing
models to the specific needs and
challenges of mon dr ag on .
An internal complex of
complementary innovations
developed in order to help
serve the social missions of
the organisation.
a s o c i a l i n n o va t i o n
eco-system
As the economic and
social context has shifted
mon dr ag on has needed to
maintain itself in ways that
continue to be disruptive.
So mon dr ag on has had
to develop new ways of
supporting innovation by
working both with members
and others to develop and trial
new ways of working.
In this way mon dr ag on
can be said to have developed
an eco-system of social
innovation by creating both
internally, and through
networks and initiatives with
others, a model of working
which demonstrates the
viability of a competitive and
socially minded business.

41 |
 Sustainability and innovation has always been
a feature of mon dr ag on s work

Founded on principle of labour Distributed co-operation between

sovereignty different groups was essential to
sustainability and growth
Vocational education and co-operative
employment Growth should involve adaptation
and innovation
Humanistic participatory business
principles The sign of vitality is not to endure but
to be reborn and to be able to adapt. 58
Mutual self-help and work ethic

58 m o n d r ag o n (2015), Arizmendiarrieta 100: Reflections.

Available at www.arizmendiarrieta100.com/wp-
content/uploads/2015/02/Reflections.pdf.

| 42
mon dr ag on s different stages of innovation
In what follows below we explore the different
stages of innovation that mon dr ag on
has engaged in. This helps us understand
its development into an ecosystem and its
continuing socially innovative commitments.
Stage 1: mo n d r ag o n builds co-operative
based social enterprises
When mon dr ag on began it was an
innovative response to a local socioeconomic
scenario that brought new actors, relationships
and resources into a specific context for
broader social good: the training school. Out
of this training school came the first ventures,
beginning with Talleres Ulgor.
Talleres Ulgor was set up in 1956, taking
its name from the initials of the men
who founded it: Luis Usatorre, Jesus
Larranaga, Alfonso Gorronogoitia, Jos
Mara Ormaetxea and Javier Ortubay.
The five founders were all students at
the technical school. In 1959, inspired
by Arizmendiarrieta, they converted
their business into a co-operative and
it became known as Fagor, one of the
first co-operatives in what would later
become mo n d r ag o n . It was one of the
most influential co-operatives in the
establishment of Caja Laboral and ultimately
in the setting up of the larger co-operative
group itself.
This was a clear example of a social innovation
taking the form of a social enterprise. Venture-
led, the founders innovated by adapting the
classic co-operative model to the specific and
challenging social context of poverty, hunger,
exile and tension,59 developing a model of
manufacturing that aimed to competitively
provide well-made goods in a way that was
both sustainable and embraced a sense of
responsibility both to workers and the wider
community.
By training them and accepting people into the
co-operatives regardless of background, the
co-operatives helped develop the skillset and
59 Mondragon 19562016 (2016) Mondragon www.
mondragon-corporation.com/wp-content/themes/
mondragon/docs/History-m o n d r ag o n .pdf
confidence of the broader community. This social
development of skills, the way of working together
in cooperation and the confidence to make these
changes is key to the development
of continuing innovation.
This stage of m o n d r ag o n s
progression is readily accepted and
conceived of by members as a social
innovation. For example Garbie,
36, comments: Going from there to
the co-operative model breaks these
hierarchies, the organisational model,
the decision-making process, the
distribution of profits For me, all
of this is what it means to be socially
innovative.
Stage 2: m o n d r ag o n develops broader
institutions to serve these enterprises for
the common good
It is possible to consider that mon dr ag on has
continued to be innovative beyond this initial stage,
and beyond its original innovation in applying the
co-operative model to this context. The progression
from one co-operative to the mon dr ag on co-
operative complex can be seen to have been even
more innovative than its beginnings.
As we have seen in our discussion of disruptive
innovation, when the first co-operatives were
developed it was found that, for these innovative
projects to sustain themselves, in an environment
in which it was difficult to do business (due
to issues such as economic deprivation and
geographical isolation) there needed to be new
supportive institutions that could enable them.
It is particularly interesting to note that this
was an early founding vision of the original
members. They recognised that innovation had
to be complementary which would need different
institutions or social innovations co-operating
to support the vision. We will go on to describe
why this is a key consideration of mon dr ag on
as a social innovation ecosystem. However as
the timeline shows, this was understood by
mon dr ag on s founders to be an essential
feature of how mon dr ag on needed to develop
to create sustainability, and was acted on.
43 |
 m o n d r ag o n s founding timeline

56
Ulgor was set up by Arizmendiarrieta
together with 5 others Luis Usatorre,
57 Jess Larraaga, Alfonso Gorroogoitia,
The vocational training at the technical Jos Mara Ormaechea and Javier
college was officially accredited. Ortubay whose initials spell Ulgor.

58
Lagun Aro was established as the
co-operative response to a lack of
social security protection for members
59
Caja Laboral was set up to provide because they were considered self-
financial support and structures employed.
for the co-ops.

62
Caja Laboral expands, opening its
second branch in Aretxabaleta.

64
A mutual support movement between
co-ops was established what would
later become the corporation.
65
Fagor Electronica began and was
the 5th co-operative to join the
co-operative group.

67
Lagun Aros current system was
practically established, although the
Mutual Benefit Service was still part
68
of Caja Laboral. Several new co-
Co-op membership reached 6000.
ops joined.

As such, complementary forms of innovation
were created in order to serve the initial models.
Seeing the need for credit and a safety net, the
founders began to set up secondary co-operatives
that would serve the manufacturing arms.
Joseba, 71, describes the development of the
credit union, Caja Laboral:60 [Arizmendiarrieta]
realised that here there was the embryo of a great idea, of
growth, but if he didnt do certain things, it could all fail.
If he didnt do certain things bound to the community it
could all fail. So he decided that what was needed was a
savings account, a bank, although he didnt exactly call
it a bank. If we dont create a bank everything else will be
undermined.
This began with Caja Laboral but quickly
there were other developments such as Lagun
Aro. Caja Laboral in particular was designed
specifically to offer capital that catered to the
financial needs of new co-operatives and others
facing difficulties.

60 Workers Credit Union, known as Laboral Kutxa

in Basque.
| 44
The disruptive nature of the social innovations
meant that a number of services were not
available to them. As such they must continue
to innovate, to forge an environment to enable
the whole. This was clearly part of the initial
vision. These developments can be seen as
clear examples of social innovation; they were
collectively set up to offer services that would
ordinarily have been provided by either private
sector actors or the state.
This required significant levels of innovation in
order to ensure that these models could serve
their purpose in a way that was in line with the
social mission and values of the co-operatives.
Within ten years, the co-operative membership
had grown to 6,000 members and created
a variety of co-operatives serving different
functions, such as a bank, and processes such
as welfare and security for members had been
designed and implemented.
The collective aspect of this approach can be seen
in business practices, such as in the way in which
the co-operatives work together in order to try
and save another that is struggling. For example,
when members were asked to sacrifice 1% of
their income to save the Fagor Electrodomsticos
co-operative when it was facing financial issues
every single one of them voted in favour of it. Whilst
this is not always a successful undertaking and
can be a source of some concern, the effort is
one in which we can see an innovative collective
response which also underpins sustainability.
The process of trying to ensure employment of
those who are made redundant, too, can be seen
as another example of this.
Stage 3: A social innovation eco-system
These institutions have been propagated over
the years with the development of a University,
provision of medical services, and other forms
of support. Behind all of these complementary
institutions was a desire to embed, enable and
make sustainable a new way of working, one
which places a desire to improve livelihoods,
and serve the common good at its heart.
This can be seen in the development of the
Business Division of Caja Laboral, and the
origin of LKS, set up as a form of incubator
for companies which is a key way in which
mon dr ag on has been able to sustain itself
as a social innovation.61
This stage of mon dr ag on s development is
innovative for all the reasons described above.
In addition, it is innovative because of the lack
of formality in these arrangements.
Importantly mon dr ag on did not formalise
the relationships between the co-operatives
until 1984 when the mon dr ag on
Co-operative Group was formed. Until
this time, the relationships between co-
operatives were informal, held together
by a shared set of values, a shared history
and a sense of kinship between the
different organisations. Much of the way
m o n d r ag o n functions continues to be
informal, for example, its salary ratios.
The presence of this informality is
important as it establishes that a degree of
innovation is possible where it is consistent
or desired. It also indicates that values are
consistently regulating and supporting the
shared profits and labour sovereignty of the
system, as seen when people attempt to make
changes that appear inconsistent with values.
The maintenance of this complex set of
arrangements based on voluntary grounds
is a highly innovative way of doing business
and one which is still present in the
organisation. In this sense mon dr ag on
can be seen as a key example of where the
values are akin to the federal structure of the
organisation rather than supporting elements.
We argue that this is a key dimension to
mon dr ag on s successful journey as an
evolving social innovation ecosystem. As Pedro,
75, comments: Business is an essential field to
promote co-operation, both in the formal ownership
structures and in informal relationships and workplace
management.
61 Ibid.
45 |
 chapter 4

mon dr ag on as a
social innovation
ecosystem case study

| 46
We have seen that as mon dr ag on has
progressed it has developed this integrated
approach even further, into something that
we have referred to as a social innovation
ecosystem.
As we explored above, previous research has
suggested that social innovation eco-systems
are often borne out of necessity.62 This was
very much the case with mon dr ag on .
Social innovation theory often refers to
ecosystems as an environment or framework
which includes the institutions, services,
capacities and capabilities required in order to
be enabling to social innovation. Explorations
of social innovation ecosystems frequently talk
about putting in place a framework in order
to ensure that luck is turned into something
predictable.63 This means recognising
interdependencies as well as needs. It also
means helping to build new institutions
when there are visible gaps in the market
or servicing them with external drivers
or support frameworks such as funding
or capacity development.
Over time mon dr ag on has developed a set
of complementary institutions which work
together within a co-operative framework.
Through this framework, the collective power
of members and participants, their capital, their
skills and their labour is leveraged, to build a
sustainable model of competitive business that
looks to serve broader social goods, for members
and beyond.
This case study gives potential to understand
mon dr ag on as a distinctive innovation
ecosystem acting at scale which was established,
is driven, and is sustained by a set of shared
social values operationalised by people, and
which also achieves broad benefits. What is
interesting here is that mon dr ag on works
at scale.

62 Braithwaite, P (2015). Social innovation ecosystems:

what the concept means, how it has been applied
elsewhere and a proposal for Northern Ireland.
Building Change Trust.
63 Philipp Von Der Wippel quoted in: Braithwaite, P.
(2015). Social innovation ecosystems: what the concept means,
how it has been applied elsewhere and a proposal for Northern
Ireland. Belfast: Building Change Trust.

47 |
 The balance of negotiating context
and changing the context

As we have already outlined, the process of
innovating is a negotiation between social
innovations changing their context, and context
changing to enable innovation. We can see this
represented to some extent in the social
enterprise sector in the UK. Incubation and
acceleration programmes are frequently used in
order to help social enterprises develop models
that work in the current context, including
helping people to understand clear processes like
commissioning and bidding for work. These are
clear programmes designed to help social
innovators understand and develop within their
context. Equally, advocates of social innovation
work in order to develop institutions and policies
that make the context easier to operate in,
helping the context to be enabling of innovation.
For an innovation to be successful, case study
examples and theory suggest that these two
dimensions have to find a balance in which they
come to work with one another. mon dr ag on ,
as noted, was a disruptive innovation and one that
was, in many ways, not enabled by its context. In
this way, it did not look to exert pressure on policy
makers, with whom history suggests they had
little traction. Instead of looking to change the
existing context they needed to build their own.
A good example is the creation of the welfare fund
Lagun Aro to compensate for being cut off from
state social security.
This can be seen to constitute the building of
a social innovation ecosystem which works
to perpetuate the conditions which facilitate
mon dr ag on s mission.

Igor, 59, member and ceo of a large co-operative says that

mondr agon functions as one connected experience, but
with different implementation systems. He suggests that
Arizmendiarrieta didnt expect the current model to survive
in the Basque area exclusively, but to adapt and generate new
models which are efficient in different societies and cultures
globally. Rather than violating the principles, we need to
adapt and renew them.

| 48
Mondragons context changing and contribution
In what follows we examine one element of
the way mon dr ag on might be said to have
changed the context around it through its
socially innovative mission.
One of the questions about social innovations
often refers to their lack of reach, impact or
scale. Criticisms of or frustrations with social
innovation as solutions sometimes focus on
the limitations of their outcomes or impact or
practice, in that they have not been distributed
as generally or as equitably as they should.64
A good way to explore this is the impact any
innovation creates in meeting its mission. In
describing mon dr ag on , people often explain
how connected it is to place and culture. This is
evidenced in socioeconomic indicators which
show its contribution but is also reflected in the
way people describe the experience of living
in the towns with a strong mon dr ag on co-
operative presence.
For many of those who were interviewed, being
part of mon dr ag on represents a shared
commitment to a collective or others in their
community. There are also links with values
and practices in the area, in that some people
feel that there is an interplay and mutual
commensurability between the co-operative
working style and the experience of living in or
around the area. Some feel that the co-operative
system is culturally embedded and broadly
similar to their personal values or ways of
doing things outside their working lives. Here
co-operatives are presented like they are a way
of life. Mikel, 55 a senior manager of a large co-
operative, who has always lived locally, calls this
being at home.
This sociocultural value commensurability
between personal and work lives and personal
acceptance of the model is very significant as it
helps us to understand worker mobilisation and
satisfaction, beyond worker ownership.
64 Moulaert, M, et al. (2015). The International Handbook
on Social Innovation: Collective Action, Social Learning and
Transdisciplinary Research. Cheltenham, UK: Edward
Elgar.
In Mondragn, the town in which mon dr ag on
was founded and its headquarters are based,
there are clear family and place-based
community links to the co-operatives. Miren,
who doesnt work at the co-operatives, but in
local government, describes the naturalness
of the environment to her: I grew up surrounded
by the co-operative at home. My parents were involved
with the co-operatives, the neighbours were all co-
operativists, my uncles were as well. It was a very
natural thing.
Interestingly awareness of the co-operative
is also often linked to geographical proximity
to mon dr ag on s epicentre in Mondragn.
There is a feeling that being part of its
immediate community, living in the town,
grants a knowledge of a way of living and
working that others do not have. Here
people sometimes talk about knowledge of the
corporation and the co-operative model getting
stronger the closer you are geographically to
the town. They also say that the frequency of
co-operatives increases the same way: Gipuzkoa,
where Mondragn is located, has a much higher
co-operative presence than the other Basque
provinces of Alava and Bizkaia. Eneritz, 54, a
co-operative member who lives in San Sebastian
says that the level of co-operatives depends on where
you look, but the further into Gipuzkoa you go, the more
apparent it is.
And, despite the presence of a healthy social
economy in the Basque Country, people perceive
that an interplay of Basque and co-operative
values have made Mondragn distinct to other
towns in the Basque Country or elsewhere, in
that the co-operative has started to change
the way people think over the years, create
confidence in them to get involved in other
activities, or has nourished their different
types of capital whether financial in
creating greater equality between people,
or social and cultural capital which focus
on their ability to work together to find
solutions or be creative. Maialen says that this
is part of the whole social fabric of mon dr ag on ,
the impulse to create things in society
49 |
 Garbine, 36, a co-operative member, describes
living in the area as a complete ecosystem. She
points out that everything from the hospital
where she was born, to the school where she
was educated, to the university where she now
works was made possible by the co-operatives
commitment to local development.
These benefits are socially impactful but there
are also economic links, in that levels of equality
are higher in the immediate area surrounding
mon dr ag on than elsewhere. As we have
seen, mon dr ag on makes a significant
commitment to its environment. The benefits
of this lie with peoples experiences of living in
this environment, and their appreciation of the
equality it has created. Much of this equality
is attributed to the income equality generated
through the 1:6 salary ratio, which used to be 1:3,
which people believe have created a large middle-
class and equality levels.
Miren describes the equality that she feels in the
town of Mondragn, a place where she doesnt
feel any richer or any poorer than anyone else:
I know that I can go out for a glass of wine, or for dinner,
and in the richest place I could find the poorest person and
in the poorest place I could find the richest person. I mean
poorest in the sense that I could meet someone who
works on the production line in the richest place
and likewise bump into the director general in
the poorest place. There isnt this separation
between people, I dont think. Everyone shares
the same spaces and we all have access to the
same spaces.
Mondragns spatial egalitarianism has also been
commented on by other observers and noted to
have deep roots: The industrial and class character
of Mondragn is reflected in its built environment.
Architectural monuments of note are few relative to
neighbouring towns The industrial and proletarian
character of Mondragn is at the heart of its local identity. 65
65 Kasmir, S. (1996). The Myth of Mondragon: Cooperatives,
Politics, and Working-Class Life in a Basque Town.
New York: State University of New York Press.
| 50
Socioeconomic data also underpins these
perceptions and experiences of life living in
mon dr ag on s epicentre. mon dr ag on has
not only created changes in context but also had
impact in meeting its vision.
mon dr ag on makes a broader and
significant contribution to economic
productivity in the Basque Country and,
more widely, in Spain. For example, in 2010
mon dr ag on contributed 3.1%66 of the total
Basque Gross Domestic Product (GDP) and
the group was also responsible for 7.5%67 of all
industrial production in the region in the same
year. In 2014, mon dr ag on accounted for
11.6% of exports from the Basque Country.68
Providing employment to the people of the
Basque Country has been an ongoing priority
of mon dr ag on since its early days; it is a
significant employer in the Basque Country
specifically, as well as globally. mon dr ag on s
economic and financial indicators69 show that
in 2015 the group employed 32,841 people
in the Basque Country. This indicates that
mon dr ag on employed around 3.7% of all
employed people in the Basque Country in
2015. 70 mon dr ag on is the fourth largest
employer in Spain as a whole, employing
62,800 people there in 2013/14.71
The Basque Country has also enjoyed a lower
unemployment rate than the rest of Spain for a
number of years72, and the employment offered
by mon dr ag on has made a contribution
to this. Furthermore, the Gipuzkoa province,
where mon dr ag on is based, has consistently
displayed the lowest unemployment rates in the
Basque Country.
66 Source: e u s tat dataset.
67 Ibid.
68 t u l ankide (2014).
69 m o n d r ag o n (2016) Economic and Financial
Indicators (English) : www.mondragon-corporation.
com/eng/about-us/economic-and-financial-indicators/
employment-distribution /
70 Source: Instituto Nacional de Estadstica. The total
number of people employed in the autonomous region
of the Basque Country is given as 894,900 for Q4 of
2015.
71 TUlankide (2014) RSC.
72 Source: Instituto Nacional de Estadstica.
27.0

22.2

17.4

12.6

7.8

3.0
2

04

10

12

14

16
0
0
0

20
20

20
20
20
20
20

20

National Basque Country Bizkaia Gipuzkoa

Poverty and inequality are also relatively low
in the Basque Country, and there is evidence
to suggest mon dr ag on are likely to have
contributed to this. For example, poverty
rates are lower in the Basque Country than
the Spanish average73 and are particularly
low where mo n d r ag o n co-operatives
are concentrated, in Mondragn and the
surrounding area. In 2014, the absolute poverty
rate in Alto Deba was 4.1%, compared to 5.9%
in the Basque Country.
In addition, the Basque Country enjoys a far
greater level of internal equality than the
Spanish average. In the graph below, Sweden and
Greece are taken as reference points for the most
and least equal societies in Europe respectively.
We can see that Spain demonstrates high levels
of income inequality but that the Basque
Country and Gipuzkoa in particular are more
equal, with an equality coefficient closer to
Swedens than to Spains.
mon dr ag on is committed to egalitarian
working practices and policies across the group.
For example, the average salary ratio between
highest and lowest paid employees/members
in the co-operative is 1:6 and it rarely exceeds
a salary ratio of 1:9. By contrast, the average
equivalent salary ratio for a FTSE100
company is 1:129.74 Although this is not a legal
principle and has become more flexible in recent
years particularly in larger co-operatives
there is still a clear adherence to much narrower
ratios than in other comparable business
contexts. This suggests that mon dr ag on ,
as a significant employer, is likely to have
contributed to relatively low levels of
inequality in the Basque Country.

Greece 0.344

Spain 0.337

Basque Country 0.271

Gipuzkoa 0.263

Sweden 0.249

73 OECD Better Life Initiative dataset (most recent data 74 High Pay Centre (2016), 10% Pay Rise? Thatll Do Nicely:
on poverty level from this dataset is given as 2010). http://highpaycentre.org/pubs/10-pay-rise-thatll-do-
nicely

51 |
 The Basque Country appears to prioritise
education and has frequently demonstrated
higher levels of educational attainment
than the rest of Spain. Basque autonomous
governmental policy, for example, has made
considerable strategic investments in its
regional education system.75 This commitment
has been mirrored by mon dr ag on , which has
emphasised education since its beginnings. It
has also invested heavily in education, through
initiatives such as funding Basque language
schools and by building educational and
training facilities which are accessible to all, not
only co-operative members. In total, in 2013,
mon dr ag on had 4,750 students studying at
their university.76
The essential term is co-operative business, I mean that
business is a noun and co-operative is an adjective.
Koldo, 66, retired co-operative member
75 Coughlan, S. (2016). Basques reinvent themselves as
education power. BBC website, June 15th: www.bbc.co.uk/
news/business-36517928
76 m o n d r ag o n annual report 2015.
| 52
A further way in which MODNRAGON is seen
to contribute to the local economy is through
its prioritisation of research and development
activity (R&D) and knowledge generation
and exchange. Over the last three decades,
Basque investment in R&D has risen from
well below the national average, to being
one of the highest regional investors in
R&D.77 Furthermore, since 2011, R&D provided
a greater percentage of overall employment in
the Basque Country than in any region in Spain
outside of Madrid. Basque regional expenditure
on R&D has also increased at a greater rate than
the European average over the last decade78.
mon dr ag on has also increased investment
in this field considerably over the same period.
In 2014, the solidarity funds (FCI, FSC, FEPI and
FRES) gave 40.1m to development activities
and inter-co-operative support, training and
R&D. For instance, from investing the equivalent
of 10 million in R&D in 1987, mon dr ag on
invested 153 million in 2015.79 This is also
reflected in its 15 R&D centres, growing
number of patents, currently totalling 451,
and trademarks.80
77 del Castillo, J., J. Paton, and B. Barroeta (2017). 9. The
Great Basque Competitive Transformation towards
sustainable innovations.Sustainable Innovation and
Regional Development: Rethinking Innovative Milieus, p. 189.
78 Eustat report: http://en.eustat.eus/elementos/
ele0011900/ti_RD_expenditure_over_GDP_in_the_
Basque_Country_has_grown_faster_than_the_
average_for_the_EU-28_countries_over_the_last_10_
years_/not0011916_i.html#axzz4Y73giV3a
79 Mondragon website: www.mondragon-corporation.
com/eng/mondragon-in-2015-growth-in-jobs-
turnover-and-earnings/
80 m o n d r ag o n (2016) Humanity at work. Available
at: www.mondragon-corporation.com/wp-content/
uploads/m o n d r ag o n -ING.pdf
A complex model of a social innovation ecosystem

mon dr ag on is a very large ecosystem to
attempt to understand, and this case study has
only presented part of various different pictures.
However, from what we do know, we suggest
that if we start to look at all the evidence
presented on mon dr ag on from a social
innovation ecosystem perspective, we can start
to draw certain links and conclusions about
how mon dr ag on s ecosystem works and
what supports it. We know, for example, that
sustainability has been a central focus of the
mission, and that the concepts of growth and
success underpin its broader social mission,
as they enable it.
It looks likely that mon dr ag on s ecosystem
functions by developing a model in which
businesses and actions are facilitated through
a complex web of support which ranges from
the direct (financial resources) to the indirect
(developing a positive context for change by
working towards the common social good
within their local community).
This support then builds the capacity of those
businesses, through various mechanisms such
as innovation, R&D, training and learning
by doing, as well as generosity to others,
which in turn feeds back into the supportive
organisations which can then further build
the businesses.
During the course of this study we have
identified key areas of mon dr ag on s activity
that perform a kind of supporting role to
mon dr ag on s sustainability: skills, non-
financial resources, support for the common
good, and financial support.
As shown in the diagram below, these
dimensions sit within an environment
which is determined by the overlap of:

1 2 3

orga n isationa l business principles e v o lv i n g c o n t e x t

va l u e s a n d c u lt u r e
Values inform action
and principles of the
organisation at large and
actors particularly. They
underpin and regulate
action.
Maintaining a commitment
to competitive and successful
business principles, where
business is equal to social aims,
ensures the long term viability of
the operation and therefore helps
to ensure that the organisation is
enabled, in the long term, to work
towards positive social outcomes
and achieve them.
Throughout the years the
political, economic, social
and institutional climate that
mondragon interacts with has
undergone changes and these
have had an impact on the
kinds of organisations that
they have had to develop in
order to sustain themselves.
They have also clearly
impacted the surrounding
environment.

53 |
 re
cultu Bu
d
es an sin

es
alu

Non-financial

sp
Organisational v

resources

rin
ciples
HUMANITY
Financial
Skills AT W O R K
support

Support for the common good

E vo t
l v i n g c o n te n

Within the mon dr ag on ecosystem we can
then identify four distinct types of support that
facilitate mon dr ag on s core mission.
These four areas are not distinct but instead
feed one another in a highly complex web of
interactions which come to facilitate the core
innovation of mon dr ag on : the development
of a competitive, and therefore sustainable,
business model that is driven by organisational
values and a culture which places a desire for
positive social change at its heart. In line with
members descriptions, we refer to this as
Humanity at Work.
For example, mon dr ag on currently has eight
different foundations through which it oversees
contributions made to a wider community.
These include: the mon dr ag on Foundation,
the Ulma Foundation, Azaro, and Mundukide.
The Errota Foundation is also a good example of
the way in which mon dr ag on looks to work
towards social-economic development beyond
its members.

| 54
 $
the prov isions of fina nci a l r esources
Since the development of Caja Laboral,
mon dr ag on has developed a number
of financial mechanisms which create a
sustainable way of funding the activities of the
co-operatives. In addition to Caja Laboral and
Lagun Aro other financial institutions have
been set up, including co-operative solidarity
funds. Through the provision of funding, and by
extending financial services both to members
and, in some cases, non-members these
institutions offer a greater degree of financial
stability to co-operatives, members and the
wider community.
the development of skills
mon dr ag on has always sought to nurture
skills among both its members and the wider
community. To this end they have invested
in and developed institutions designed to
promote skills which can, in turn, feed into the
maintenance and progress of mon dr ag on s
businesses. In addition because mon dr ag on s
educational institutions are frequently open to
people outside of the membership, this helps
to build skills and spread the values of co-
operation and solidarity beyond mon dr ag on ,
in turn serving a broader social good.
the prov ision of non-fi na nci a l r esources
mon dr ag on has also developed a set of
organisations that develop other resources.
The enterprise department of Caja Laboral,
for example, provides a kind of incubation for
businesses looking to develop. Also, the Bilbao
Berrikuntza Faktoria, the building which houses
MTA, is a space dedicated to helping to develop
new and innovative businesses.
In addition there are a number of organisations
within mon dr ag on which have R&D&I
functions or which can be considered to serve
the wider organisation, including Saiolan, an
innovation centre which supports the creation
of new businesses, and IK4, a research alliance
of several innovation units.
w o r k i n g t owa r d s a c o m m o n g o o d
The articulated values of the community appear
to be strong and mon dr ag on continues to
make efforts to try and support the community,
both members and non-members.
mon dr ag on has always had many initiatives
that do not directly feed their own enterprises
but where the benefits are more diffuse,
more generalised and where positive benefits
are intended for people well beyond their
membership. Examples of this range from the
development of schools, which are available for
the community, to the Basque Culinary Centre,
which along with providing training looks to
use Gastronomy as a driver of socioeconomic
development. As Miren, 56, says: I have to thank
the co-operative because in my house, my brothers
and I, we all had the opportunity to go into higher
education, we all had access to university I dont think
we would have been able to without the co-operatives.
Evidently mon dr ag on continues to invest
in and provide resources and opportunities
which go beyond their own direct interests, to
contribute to a broader common good. This does
not negate the fact that this broader common
good in turn is likely to nurture mon dr ag on
as an organisation in line with the idea that such
investment would repay itself.
55 |
 Leveraging capital to have broad benefits
mon dr ag on is interesting because it is a
competitive business which holds and commits
to a set of social values which can be seen to be at
the heart of its work. The innovation ecosystem
that we describe above is enabled by the success
of the wider business activities. These not only
help to build an environment of prosperity
but they also mean that the organisation can,
through its co-operative model, leverage the
capital, labour and skills necessary to further
mon dr ag on s social and business aims and
to adapt to a change economic context. This is
described by members as a social need: it is
a responsibility to create good and effective
business models.
In this sense mon dr ag on exhibits a high
level of self-sustainability and, through its co-
operative model, has been able to develop both
scale and diversity in its institutions.
Importantly this ecosystem model can be
conceived of as being regulated by two distinct
dimensions:
A robust and competitive business
model based on cooperative
principles which facilitates the
resources necessary to serve the
social mission effectively
| 56
It is key to understand that the co-operative
model provides the crux of this ecosystem
because it provides the democratic and
participatory framework to ensure that
resources can be leveraged to create
adaptive capacity and underpins the
ability of the organisation to adapt to
the environment around it.
In particular it is the ability to leverage
the power and resources of the people
of m o n d r ag o n that has created the
innovation ecosystem:
The sign of vitality is not to endure but
to be reborn and to be able to adapt. 81
A clear set of social values which make and
remake the co-operative model, help to define
the contribution m o n d r ag o n makes to its
community and regulate working practices
to ensure a sustainable business model
81 m o n d r ag o n (2015), Arizmendiarrieta 100: Reflections.
Available at www.arizmendiarrieta100.com/wp-
content/uploads/2015/02/Reflections.pdf.
57 |
 chapter 5

Conclusions and
their implications:
mon dr ag on

| 58
In this case study we have reviewed different
types of evidence to help us understand
the social nature of mon dr ag on as an
organisation. While not exhaustive it has
looked to outline the key principles and
elements that would help people to shape
an understanding of this extraordinary
organisation and what we can learn from it.
We have reviewed different aspects of
mon dr ag on , including its values and
working practices, and its models of maintaining
its own existence. We have touched on some key
aspects of mon dr ag on s development and
briefly on its contribution to the environment.
We have however focused on considering this
information through a social innovation lens
to broaden the field and contribution of social
innovation.
This has helped us understand it as a social
innovation ecosystem. What we have not been
able to do in this case study is approach in any
detail the experiences people have had, and the
history and type of growth, or make connections
to what other socially-led innovations may have
been taking place in the Basque Country at the
time (or globally). Our research was limited to
the experiences of people from different co-
operatives in the Basque Country of which there
are very many and this is not a representative
case. It is clear that mon dr ag on believe that
not every experience is the same, especially
because there are so many different co-operatives
and experiences in its family. This is why we
have looked mainly at key features. We will be
exploring this case further.
However, we believe that this case study,
as it stands, suggests several key elements
that have been intrinsic to m o n d r ag o n s
development and should be considered
by anyone looking to work between
organisations or between sectors, groups
of people and community activists to create
sustainable change with broad benefits.
1. Competition and social innovation
mon dr ag on shows us that being socially
innovative, or doing social good, doesnt have
to differ from achieving success or being
competitive in a broader market. In fact,
discussions with mon dr ag on members
reveal that mon dr ag on believe that they
are more competitive because they have social
principles and practices that guide their work
and mobilise them to do well. They also feel
a responsibility to be successful in order to
generate shared wealth and create social impact,
and act accordingly.
This is intentional to the sustainability of the
ecosystem: since its founding, those behind
mon dr ag on have recognised that it would
need to be successful and grow in order to fulfil
its social mission effectively and create broader
social contributions. This need to foster success
to create social ends is a key feature of its social
innovation narrative and helps us understand
both why it is so important for mon dr ag on
to be successful and how this is achieved.
This suggests why their social innovation
features the social values and practices that
have been focused on in this case study are not a
peripheral element of their work. These practices
are embedded and key to its decision making,
allowing it to make decisions consistent with the
needs of local populations and their values.
2. W
 ealth distribution and sharing
underpins egalitarianism
mon dr ag on also offers an example of how
successful business can fairly distribute wealth
amongst members.
mon dr ag on also helps us broaden our
concept of what wealth and social impact
are. Effectively, mon dr ag on appears to
have created a wealth of different kinds of
capital - economic, social, and cultural - and
distributed it widely, so that past, current
and future generations can share in it. This
is driven by a consistent set of values about how
to work together and the value of prioritising
people, labour, over capital. The cooperative
model has been a tool to underpin this.
59 |
 3. S
 ocial values and commitments to place
and territory in business are possible
mon dr ag on offers a clear example of
how social and cultural values can be
commensurable with the methods, means
and modes people take to sustain their
livelihoods in any region, and live well,
unlike many traditional larger businesses.
This is interesting because in the past people
have suggested that it might be possible
to develop a model of working in which a
responsibility to communities is not placed
as secondary to business principles, but
rather is held as equal or more important to
it. Some would argue that a shared value model82
takes this kind of approach.
However, critics of shared value models see it as
an ideal type which often does not explore the
question of what happens if and when there is a
necessary play off between the economic and the
social. mon dr ag on , which goes far beyond
a model of corporate social responsibility
in making business a way of enabling social
goods, deepens our understanding of how
the economic can be wielded by people
in order to enable the socially positive
in places.
4. P
 eople must and can work together
to create sustainable change
mon dr ag on represents a largescale
approach to solving social issues for
common good. Interestingly our case study
shows that the principle of working together in
inter-co-operation is key to mon dr ag on s
size and impact. This has been achieved by
different people, constituent parts and features
all working together. And today mon dr ag on
members clearly state that they feel part of an
experience, which mobilises them to action and
participation.
82 Porter, Michael, (2011). Creating Shared
Value,Harvard Business Review; Porter, M. and Kramer,
m. (2002). The Competitive Advantage of Corporate
Philanthropy,Harvard Business Review, 80(12): 5669.
| 60
In doing so mon dr ag on s example
questions and challenges the myth that only
specific people, policy-makers or individual
entrepreneurs make change happen on their
own83. mon dr ag on s ecosystem case
suggests that it is possible for everyone
to be innovative or create change if the
right conditions are created for them to
participate effectively. At mon dr ag on
it is expected that everybody be involved in
innovation. Fundamentally members consider
themselves protagonists driving this action for
common good.
5. New attempts to work together should
involve new methodologies which
increase social participation
mon dr ag on , unlike some other innovations,
or social movements, has never been co-opted
or become mainstream. It represents a specific
cultural experience and context, as we have
outlined in this case study.
However, it does not mean that it is not possible
to learn from this case study to help us better
understand how social innovation ecosystems
work or to look to different societies, especially
those which are more equal, to see them as
ecosystems of equality and learn from them.
mon dr ag on , because of its explicit values,
helps us understand how socially driven values
should be intrinsic to other organizations
and places who wish to foster fair and truly
socioeconomically transformative processes
which have social benefits incorporating large-
scale and globally competitive business models.
The m o n d r ag o n case study also tells us
that social innovation practices should
incorporate the idea that people can make
change happen together, whatever their
backgrounds, and develop new tools which
facilitate this participation.
83 The Entrepreneurial State. Mazzucato, M.
6. S
 ustainable ecosystems must wield
sustainable tools

mon dr ag on , as we have noted, has achieved

its growth and impact in the context of a lack of
resources. Protagonists, as they call themselves,
realised early on that their way of working
must be sustainable, and diversified, as well as
requiring complementary enabling institutions
to underpin growth and legitimacy.

Most treatments of ecosystems or large scale

egalitarian societies fail to explain or solve the
need for sustainability without major external
inputs and assistance such as funding or
capacity development. However, mon dr ag on
shows how it may be possible, through labour
sovereignty and through wielding wealth
and capital as an instrument of equality
rather than an instrument of inequality,
to create a sustainable and successful
ecosystem with broad social benefit.

One of our characteristics has been the practical

sense of knowing how to act in a field of possibilities
without renouncing our ideals. It has been possible
to unite and take advantage of the opportunities
that are in the common interest.
Excerpt from Arizmendiarrietas concept
of the mondr agon experience 86

84 m o n d r ag o n (2015) Arizmendiarrieta 100,

Reflections: www.arizmendiarrieta100.com/en/
reflections/

61 |
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